The GBPUSD currency pair has been surging since early August. Over a week, quotes have jumped from 1.314 to 1.345. However, at the top of this range, pound buyers have faced a downtrend that originated from a three-year high set on July 1. Meanwhile, the Stochastic Oscillator and other technical indicators have entered overbought territory, increasing the risk of a correction. The 1.337 and 1.325 levels could be downside targets.
At the same time, there is a chance that the pair will continue rising up to a half-year peak, which was broken down in late July. However, the likelihood of reclaiming levels above this line is low, as its breakdown was sharp, and the bulls did not attempt to regain the initiative. Traders are now considering opening short positions on GBPUSD—ahead of testing the 200-day moving average—as a favorable market strategy.
Yesterday’s growth momentum was triggered by the Bank of England’s (BoE) monetary policy decision. The key rate—as widely expected—was cut from 4.25% to 4%. But the voting process was the center of market attention. Four out of five BoE officials argued for easing monetary conditions. Inflation data remains the main deal-breaker. In September, it could accelerate to 4%.
However, BoE Governor Andrew Bailey stressed in his speech that the current price growth is likely temporary. He promised to continue rate reductions, but did not hint at when the next such step would take place. Analysts surveyed by Bloomberg project a pause at the BoE’s September meeting, followed by a cut in November.
In the meantime, market participants are shifting their focus to next week. On August 12 (Tuesday), the UK employment data and US inflation report for July will be released. These statistics could intensify the GBPUSD correction.
Consider the following trading strategy:
Sell GBPUSD below the 1.345 level. Take profit 1: 1.337. Take profit 2: 1.325. Stop loss: 1.355.
This content is for informational purposes only and is not intended to be investing advice.
