- For four consecutive trading sessions, the price of the GBP/USD currency pair stabilized in a range between 1.2792 and the support level of of 1.2685.
- It settled around 1.2760 at the time of writing the analysis.
- The slope of the currency pair is still bearish. It may remain in motion until the markets react to the announcement of the US inflation figures, the most important event for the markets' activity.
New research has emerged from JP Morgan. It confirms that the US dollar can maintain its recent upward trend with the help of favorable seasonal trends and will not be affected by the rating agency's recent downgrade of US debt. Accordingly, analysts at Wall Street Lending and Investment Bank say that the dollar outlook is also supported by a favorable macroeconomic setup that includes a rise in interest rates in America and the superior American economic performance.
JP Morgan analysts said that “In our view, the near-term macro landscape is more important and should provide support for the dollar. Our view in recent weeks has been to be defensive with a bullish USD bias given the resilience of US data and the significant pullback in European/Chinese data, amid an environment where the dollar is yielding 5% and G4 central bank balance sheets are shrinking at a record pace.”
All in all, the recent US debt downgrade by Fitch has garnered a lot of attention among market participants and analysts alike, but it is seen as having little impact on the currency, and in fact, the dollar rose during this episode. The US dollar has outperformed most of its major counterparts over the past month with the EUR/USD exchange rate fading below 1.10, after hitting 1.12 in July. Meanwhile, the GBP/USD rebounded to a move of 1.31 and back just below 1.27.
The forex rate research team at JP Morgan added in a weekly briefing that the near-term outlook remains bullish for the US dollar due to the economic exclusion of the US, increased supply of Treasury bonds, and quantitative tightening at the Federal Reserve, all of which are widening yield spreads in favor of the US dollar. Moreover, the seasonality of August tends to favor the US dollar.
JP Morgan's research shows that August is a weak liquidity month in macro markets due to investor deleveraging which is bullish for the US dollar and affecting higher-yielding currencies (of which the GBP is now routinely rated) due to positioning. The researchers acknowledge that the United States still faces fiscal challenges to deal with, including budget deficits that set a record for a period other than a recession. Moreover, a country's current account balance - the result of imports exceeding exports - is something that could weigh on us at some point in the future.
GBP/USD Technical Outlook
According to the performance on the daily chart below, the price of the GBP/USD currency pair still tends to decline. The bears' control over the trend will strengthen if it moves towards the support level at 1.2580, and at the same time, it moves the technical indicators towards strong oversold levels.
You can think of buying from him or less. This may happen if US inflation figures come out tomorrow, supporting further tightening of the US Federal Reserve's policy. On the other hand, the currency pair may timidly return to the vicinity of the psychological resistance at 1.3000, in the event that US inflation numbers come in support of stopping the Fed's policy tightening.
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