Let's get straight to the point: the GBP/USD has been in an upward trend since last month, but uncertainty still prevails. Currently, the pair is in the 1.2710 range, but price movements have been mixed this week due to indecision over the next steps from the Fed and the Bank of England.
It was expected that the Fed would start cutting interest rates in September. However, the minutes of the U.S. Federal Open Market Committee (FOMC) meeting released on Wednesday dampened those hopes. Fed officials expressed concern about persistent inflation and did not rule out additional monetary tightening. Raphael Bostic from the Atlanta Fed stated that they would likely keep rates high for a long period due to the significant increase in consumer prices. Recent data also showed a rise in business activity, which could lead the Fed to maintain high rates, contrary to market expectations of a double 50 basis point cut this year. This gives a boost to GBP/USD in the medium term.
Across the Atlantic, the Bank of England was inclined to ease its monetary policy in the summer, as suggested by Deputy Governor Ben Broadbent and Chief Economist Huw Pill. However, recent UK inflation readings in April were worse than expected: the consumer price index was at 2.3% annually, above the forecast of 2.1%, and core inflation was 3.9%, exceeding the expectation of 3.6%. With inflation decreasing more slowly and business activity increasing, the Bank of England may delay rate cuts until the fall, supporting the pound sterling.
Support and Resistance Levels
Technically, GBP/USD has exited a medium-term descending channel and is now attempting to consolidate above 1.2695 (Murray [8/8]). If successful, it may head towards targets of 1.2817 (Murray [+1/8]) and 1.2890 (Fibonacci 61.8%). On the sellers' side, the crucial level is 1.2573 (Murray [7/8]), reinforced by the middle line of the "Bollinger Bands". If broken, it could lead to a drop to 1.2451 (Murray [6/8]) and 1.2329 (Murray [5/8]).
Technical indicators support the continuation of the upward trend: the "Bollinger Bands" point upwards, the MACD is bullish in the positive area, although the Stochastic is tilted downwards, indicating a possible limited correction.
Resistances: 1.2817, 1.2890
Supports: 1.2573, 1.2451, 1.2329
Trading Scenarios
For traders who are alert to opportunities:
Longs: Consider opening long positions from 1.2748, targeting 1.2817 and 1.2890, with a Stop Loss at 1.2660. Realization period: 5-7 days.
Shorts: Short positions can be opened below 1.2573, targeting 1.2451 and 1.2329, with a Stop Loss at 1.2650.
Conclusion
The GBP/USD is navigating uncertain waters but is full of opportunities. Fundamental analysis shows that both the Fed and the Bank of England are in a dilemma, creating volatility. Technical analysis, on the other hand, offers clear trend signals and possible entry and exit points. Stay attentive to economic data and adjust your strategies as needed to make the most of this dynamic scenario.