GBP/USD rates, analysis and charts
• The pound sterling fell slightly against the US dollar on Friday
• It appears that the weakness in EUR/USD has continued
• The general uptrend looks the same
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The British pound was weaker against the generally stronger US dollar on Friday as weak European economic data underscored global growth uncertainty and prompted nervous investors to return to the safe-haven dollar. The BoE’s irrational half-percentage-point rate hike in the previous session beat expectations but, perhaps surprisingly, failed to lift the pound back above its June 16th high in fourteen months. Markets fear that the Bank of England may be forced to tip the British economy into recession if it succeeds in curbing domestic inflation which is among the highest in all developed markets.
This economy has been more resilient than forecasters feared at the start of this year, but that very strength is now boosting inflation and making it likely that prices will have to rise much more so now. Official data released on Friday showed a surprising increase in retail sales, driven by a warm start to summer and lower fuel prices. Despite the Bank of England’s action this week, the focus of the European currency market on Friday was on the euro. The deplorable PMI figures in Germany and the Eurozone weighed on the single currency, which sent the pound sterling lower with it. Manufacturing activity continued to contract in June, according to the data, with service sectors expanding at a very slow rate.
The pound can be set for a period of movement with the waves of US dollar demand rather than trading on its own merits, or lack thereof. This is because the coming week offers very few top-notch economic numbers for the UK. The only major release to be made is the final official snapshot of Q1 GDP. This is expected to be revised lower, to show weak annual growth of 0.2%, from a preliminary reading of 0.6%.
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How to trade GBP/USD
Technical analysis of the GBP/USD pair
The graph has been compiled using the trading view
GBP/USD remains a broad bullish bias within the upward channel that started on March 20th and is in any case just an extension of the upward movement seen since the September lows of last year. The pair managed to breach the top of the channel in the past two weeks, but it didn’t look very comfortable there and is now back down below it. The channel top is now offering resistance at 1.27788.
Near term support is likely to be May 8th intraday high of 1.26479 and June 8th high of 1.25219. Below that, the first Fibonacci retracement will appear to rise to the tops of this month from the lows of last September. This comes at 1.22507, and testing it means that the current bullish trend has failed comprehensively. However, there is still little sign so far that it will head, and it is likely that the pair will remain biased to the upside even if it sees reversals to the upside. It can be completely distinguished without negating it.
The sentiment indicator for IG suggests some pullback and consolidation are likely. Traders on the platform have a moderate bearish bias on the GBP, which is perhaps not surprising given the current high GBP/USD levels.
– By David Cottle for DailyFX