GBPUSD rallied sharply last week, surging above the 1.32 level and hitting the highs since March 2022. The rally has been going on for 3 weeks now, and during this time there hasn’t been a single significant correction yet. At yesterday's trading session, the desire of the bulls to lock in a good profit and close at least part of the long positions has already been noticed. It’s hardly worth waiting for the quotes to return to the levels of the beginning of August, but a pullback to the level of 1.309 is quite possible for GBPUSD sellers.
The large-scale weakening of the dollar, caused by the speech of Fed Chair Jerome Powell at the conference in Jackson Hole, could soon be replaced by a recovery. According to Citi analysts, the upcoming U.S. presidential election will increase volatility in financial markets. This circumstance will support the US currency. In addition, the dollar historically demonstrates positive results in September. In 8 of the last 10 years in this period there was an increase in the value of the dollar, Citi experts said.
The Fed is not the only central bank intending to ease monetary policy soon. In his speech at Jackson Hole, the head of the Bank of England Andrew Bailey also spoke in favor of gradual rate cuts. The British regulator made the first move on August 1, and market participants are pricing in a September rate cut with a 30% probability. In addition, new economic statistics can significantly increase the chances of such a move prior to the BOE meeting on September 19.
The British Retail Consortium has published the relevant data today. According to the estimates of the BRC, in August the country's stores reduced prices for the first time since October 2021. The change from inflation to deflation is signaling the need to reduce the cost of borrowing. Reuters analysts expect prices to return to growth after gas tariff increase prior to the heating season, but there are no other reasons for the acceleration of inflation in the UK.
The RSI indicator on the daily chart of GBPUSD shows the strongest overbought since mid-July. Now, like a month and a half ago, a corrective decline is expected. The nearest target for the pullback is the level of 1.309.
The following trading strategy can be suggested:
Sell GBPUSD at the current price. Take profit — 1.309. Stop loss — 1.325.
This content is for informational purposes only and is not intended to be investing advice.
