Bearish view
Sell the GBP/USD pair and set a take-profit at 1.3300.
Add a stop-loss at 1.3500.
Bullish view
Buy the GBP/USD pair and set a take-profit at 1.3500.
Add a stop-loss at 1.3300.
The GBP/USD pair continued its uptrend, reaching its highest level since June 17, after the US published another set of weak macroeconomic data. It jumped for six consecutive days, as traders focused on the upcoming FOMC minutes and statements from key Fed officials.
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FOMC to Publish Minutes as US Data Disappoints
There are signs that the US economy is slowing down, raising the possibility that the Federal Reserve will not hike interest rates later this year. A report released by the Bureau of Labor Statistics (BLS) showed that the economy created just 57k jobs last month.
Similarly, reports by the ISM and S&P Global showed that the manufacturing sector deteriorated in June. Two reports released on Monday showed that the services sector also performed poorer than expected. The S&P Global services PMI dropped to 51.2 from the previous 51.3, while the ISM non-manufacturing PMI fell from 54.5 to 54. These two reports were weaker than what analysts were expecting.
There will be no major macro data from the US and the UK this week. As such, the main events to watch will be the upcoming FOMC minutes, which will provide more details on what officials deliberated in the last meeting. In that meeting, officials decided to leave rates unchanged, with nine members signaling support for hiking later this year.
The GBP/USD pair will also react to some statements from Federal Reserve officials like Christopher Waller and New York’s John Williams. These officials will provide more information on the economy and the Fed outlook now that they have received key US data.
The GBP/USD pair is also rising as the fear of the UK governance crisis fade, with investors giving Andy Burnham a chance. In addition to the strong sterling, UK stocks and gilts have jumped recently.
GBP/USD Technical Analysis
The GBP/USD pair has rebounded substantially in the past few days, moving from a low of 1.3143 in June to 1.3391 today. It has moved above the strong, pivot, reverse level of the Murrey Math Lines tool.
The risk, however, is that the pair has found a strong resistance at the 100-day moving average. It has also formed an inverted cup-and-handle pattern, a common bearish continuation sign.
Therefore, the pair will likely resume the downtrend as traders start booking profits. If this happens, the next level to watch will be at 1.3305, the strong, pivot, reverse level of the Murrey Math Lines tool. A break above the 100-day moving average will point to more gains ahead.
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