Sustained economic growth in the U.S. contributes to the dollar's further strengthening and causes bearish investors to fight. This is especially evident in the GBPUSD pair, which is in a downward channel.
Traders are awaiting the release of U.S. inflation data on Wednesday. Investors are hoping that the indices will remove uncertainty about the Federal Reserve's (Fed) interest rate trajectory through the end of 2023.
Market activity is likely to remain moderate until the U.S. Consumer Price Index (CPI) statistics are released this Wednesday.
According to Nicholas Frappell, Global Head of Institutional Markets for ABC Refinery, if inflation rates meet or exceed forecasts, it could create new momentum for the dollar.
Signs that the dollar will keep benefiting from its yield advantage over other currencies have weakened bearish support. Data on speculators’ net short positions in the dollar showed that they declined to $7.17 billion last week after reaching a two-year high of $21.28 billion in late July.
Meanwhile, according to CME's FedWatch tool, there is a 93% probability of keeping interest rates unchanged at the Fed's meeting on September 19–20. However, there is a 41% chance of a rate hike in November.
In addition, a number of important data in the UK will be published tomorrow. The volume of industrial production in the country is expected to decline. Confirmation of this forecast may have a negative impact on the British pound, as it reflects the outlook for the country's industry development.
The GBPUSD currency pair shows the formation of a corrective downtrend on the H4 timeframe.
In terms of wave analysis, the price is in the formation of the second ascending wave on the H2 timeframe. The new wave system took place after the price pullback from the trend support of the senior timeframe. The strong news background of the mid-week may create conditions for the change of the current trend into the third descending wave.
Signal:
The short-term outlook for the GBPUSD pair suggests selling.
The target is at the level of 1.2300.
Part of the profit should be taken near 1.2440.
The Stop-loss is set at 1.2640.
Bearish trend has a short-term character, so the trade volume should not be more than 2% of your balance.
This content is for informational purposes only and is not intended to be investing advice.
