The GBPUSD currency pair set a 14-month high in mid-June, slightly below the 1.285 level. Then within the correction the price was gradually declining until it reached the 50% Fibonacci level (1.258). At the end of last week bulls got active again, trying to return GBPUSD to its recent highs. The news background might help market participants by suggesting some pullback in the dollar and the pound's recovery.
The American currency was under sellers' pressure after the inflation statistics released on Friday. The Personal Consumption Expenditures Price Index (PCE) in May quite unexpectedly dropped from 4.3% to 3.8%, while the forecasts suggested its rise to 4.6%. And while the core PCE did not show the same positive dynamics (only a slight decline from 4.7% to 4.6%), that did not save the dollar from a massive sell-off.
Clearly, traders bet big that the Fed’s interest rate hike at the meeting on July 26 will be the last, and the dollar has already passed its highest point. At the same time, the Bank of England is expected to continue the cycle of monetary policy tightening. With inflation at almost 9% the British regulator clearly has a lot of work to do. Forecasts about the BOE’s highest rate continue to rise, and by the moment the expectations of some market participants reached the 6.5% level.
The pound might also benefit from improvements in the British economy. Today's manufacturing PMI data showed an increase from 46.2 to 46.5. Although it is still below the key mark of 50, just the fact that it is turning to an uptrend could support the national currency.
The GBPUSD currency pair set a daily high slightly above the 23.6% Fibonacci level (1.272) on Friday. To return to the area of the June highs, the prices should consolidate near this level. The growth scenario is relevant as long as the prices are higher than support at 1.258.
The following trading strategy may be offered:
Buy GBPUSD in the range of 1.264–1.267. Take profit – 1.272. Stop loss – 1.258.
Traders may also use the Trailing stop instead of the fixed Stop loss at their discretion.
This content is for informational purposes only and is not intended to be investing advice.
