GBPUSD takes a wait-and-see attitude

The U.S. Dollar (USD) fell slightly on Wednesday as Fitch downgraded the US government's credit rating from AAA to AA+. This shattered confidence in the U.S. economy ahead of this week's key data.

Fitch pointed to deteriorating fiscal conditions over the next three years and the growing burden of government debt.

Such a small drop in the dollar was also due to positive macroeconomic data released on Tuesday. The ISM Manufacturing PMI showed an increase to the level of 46.4 from the previous value of 46.0. This indicates a moderate production stabilization in the States.

Tomorrow the Bank of England will make a decision on the interest rate. It is expected that the rate should increase by 0,25% to the level of 5.25%. The inflation rate in the UK is quite high at 7.9%, forcing the regulator to tighten its monetary policy. However, this strategy has already been met with some opposing views in the country. Former Governor of the Bank of England Mervyn King believes that too tough measures may lead to recession and increase unemployment due to the growth of corporate bankruptcies.

Interest rate hike increases the value of the national currency. However, this has already been taken into account by the market. Therefore, market participants will focus all their attention on the Bank of England governor's comments. The interest rate decision will be published on August 3 at 11:00 GMT.

Meanwhile, the market is anticipating the U.S. nonfarm payrolls data, which provides moderate support for the dollar. The data is to be published on Friday at 12:30 GMT.

The H4 timeframe shows that the GBPUSD currency pair has broken out of the uptrend.

In terms of wave analysis, the price is forming the third descending wave. The breakdown of the first wave at 1.2800 has already happened. The downward movement may intensify in the near future. The next support is at the level of 1.2660.

Signal:

Short-term prospects for GBPUSD suggest selling. 

The target is at the level of 1,2480.

Part of the profit should be taken near the level of 1,2660.

A stop-loss could be placed at the level of 1,2965.

The bearish trend is short-term, so trade volume should not exceed 2% of your balance.