The recent selling operations pushed the price of the GBP/USD pair to the threshold of the support level 1.2600, which paves the way for a break in the bullish trend. This moved towards the resistance level 1.2848, its highest in 14 months, and settled around 1.2640 at the time of writing the analysis. Overall, the recently popular pound is still holding some recent gains in relation to several currencies including the dollar. The record increase in speculative buying over the last week and a history of losses in these conditions has led some to see it as a short-selling opportunity.
The British Pound has been on the run until recently, but the recovery generated by the US dollar, the surge in bond yields and the implied market expectation of the Bank of England (BoE) bank exchange rate have halted the rise of the pound since the middle of the month. Prior to driving correction is now underway. Commenting on the performance, Brad Picktel, Forex Analyst at Jefferies, said, “I am selling GBP/USD because I think the conundrum that the British economy and the Bank of England face is starting to come to a head and I expect the currency to bear the brunt of the pain in the future. And EUR/USD looks like a short too, but I haven't pulled the trigger here yet.”
Accelerating wage growth, a resilient economy and a rebound in core inflation have pushed the year-end market implied bank rate up to 6.25% in recent weeks and prompted the Bank of England to raise the benchmark from 4.5% to 5% last Thursday but sterling lost ground against dollar since then.
The dollar was broadly bought at this time, but the pound sterling too with the speculative market has now grown its “long” position at the fastest rate ever over the same period, creating the risk of any future losses compounding if that part of the market heads for exits. An increase in speculative appetite for the pound may have prevented it from falling further in recent trade, but it could become more than just a statistical risk if the latest economic growth figures are out of the UK on Friday, or if US inflation numbers go the wrong way to the Reserve Bank's target.
Surveys of economists indicate that official figures will confirm that the UK economy expanded by 0.1% in the first quarter on Friday, just hours before the Fed's preferred inflation gauge is directed to show that May's core PCE inflation rate remains at 4.7%. year to the end.
However, without a catalyst for a deeper correction, there are few technical hurdles on the charts to keep GBP/USD from rising back towards the 1.2850 level seen in early June, and this could happen in the event of the current rebound in American Stock Exchange. Prices fade for any reason in the coming days. The latter may be especially likely if the Fed's preferred measure of core inflation eases further because this would put into question market expectations of higher US interest rates again later this year, although some analysts say the currently high level British bond yields should also prevent the pound from falling further.
Sterling forecast against the dollar today:
- It is noticeable that the bullish trend of the GBP/USD pair has begun to break.
- The bears' control over the trend will strengthen if it moves towards the support levels 1.2550 and 1.2480, respectively.
- On the other hand, the bulls will not control the trend again without moving the currency pair around and above the resistance 1.2800 again.
The sterling-dollar currency pair will be affected today by the reaction to the results of the US economic data, the growth rate of the gross domestic product and the number of weekly jobless claims.
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