Analysis of GBP/USD, EUR/GBP, GBP/AUD

GBP Rate, Charts and Analysis:

Read more: Oil Price Outlook: WTI and Brent crude are higher as the OPEC Symposium in Vienna kicks off

Sterling and British PMI Construction and Bank of England decision-making panel survey

It seems that the British pound is poised to continue its excellent performance against the major currencies in the coming days and weeks. Market participants see the UK as facing a greater challenge in combating inflation that could lead to a higher peak rate from the Bank of England (BoE) than the Federal Reserve and European Central Bank (ECB). As it stands, market participants are pricing in at a peak rate of 6.5% by March 2024.

When you look at the inflation picture, it becomes increasingly difficult to disagree with market participants despite the BoE feeling that inflation will come down very quickly in the second half of the year. A BoE decision-maker panel poll this morning will only reinforce the BoE’s belief that inflation is on the way down as firms expect lower output price inflation over the next year as next year’s output price inflation was expected to be 5.3% in three months. through June, down from 5.4% in the three months through May. CPI inflation expectations fell one year ago to 5.7% in June, down from 5.9% in May, with the current CPI perception of businesses down about 8.9% from 9.8% in May. However, prices are holding steady for the time being as companies reported that annual unit cost growth remained flat in June at 9.4%. Until we see that forecast turn into concrete data, my overall feeling about the UK and global inflation picture is unchanged with more stickiness ahead in my humble opinion.

Compare headline inflation in the United States and the United Kingdom euro region.

Source: TradingView, prepared by Zain Fouda

This morning also brought in the UK’s Construction PMI data which showed a decline for the first time in five months. The decline came on the heels of a decline in residential activity, while residential work recorded its fastest decline in nearly 3 years. A rare positive result from the data came in the form of input prices, which fell for the first time since January 2010. According to Tim Moore, chief economist at S&P Global Market Intelligence, weaker housing market conditions in the wake of higher borrowing costs were a major constraint on construction output in the kingdom. United States in June. Even with the slowdown, there is little chance that we will see a pause from the Bank of England (BoE) at the July meeting, which bodes well for continued GBP strength.

Price actions and possible setups

GBP/USD

GBPUSD posted a decent rally this morning after consolidating above the support at 1.2680. Looking at price action, it looks like we could be on the way to new highs as last nights FOMC meeting minutes which were a bit upbeat failed to derail the bullish momentum.

Going back to the 2-hour time frame, we get a golden cross pattern in the Asian session as a precursor to the rally that we witnessed in the European session. GBPUSD is now only 80 pips away YTD with the psychological level of 1.3000 looking particularly attractive.

Alternatively, the ascending trend line and the 50-day moving average are immediate support areas that are holding the upside valid at this point. Only the daily candle break, close below the trendline, and recent swing low around the 1.2600 handle can convince me to change my current cable bullish bias.

Key levels to watch out for:

Support levels:

• 1.2680
• 1.2600
• 1.2568 (50-day moving average)

resistance levels:

• 1.2850 (YTD high)
• 1.3000 (psychological level)
• 1.3250

GBP/American dollar daily chart

Source: TradingView, prepared by Zain Fouda

GBPAUD

From a technical perspective, GBPAUD has been a particularly interesting pair and I’ve been watching it closely. (Check out my analyst pick on GBPAUD here). As discussed in my analyst pick, I was looking for a new high on GBPAUD after the third touch of an ascending trendline which played out perfectly as GBPAUD printed a new high around 1.9240 on June 28th.

GBP/Australian dollars daily chart

Source: TradingView, prepared by Zain Fouda

After some consolidation, the pair found support at the psychological handle of 1.9000 with a bullish engulfing candle closing yesterday, which indicates more upside. Given the price action and given that we have seen a pullback, I still anticipate further gains for the GBP with the underlying backdrop supporting such a move as well. The RBA has chosen to pause rate hikes again as the Bank of England is expected to deliver another rate hike this month with more already priced in by market participants.

is reading: Reserve Bank of Australia: Trader’s Guide

EURGBP

EUR/GBP daily chart

Source: TradingView, prepared by Zain Fouda

EURGBP on the above daily chart is on its way to print new lows after retesting the ascending trend line after the breach seen on May 31st. EURGBP is really interesting and it’s also my best trade idea for the third quarter which you can download here.

Looking at the overall price action, I think we can take advantage of the psychological level of 0.8500 which will be a fresh low before a possible bounce back towards the 0.8560 resistance or possibly the 50 day EMA which is currently at 0.8639. This should provide potential short positions with a better risk and reward opportunity as a push down towards the 0.8350 support area.

Looking at IG’s client sentiment data, 73% of traders are currently long on EURGBP. Given that we usually take a contrarian view of Client Sentiment data, we could see a short-term correction before resuming the continuation of the downtrend.

— Written by Zain Fouda L DailyFX.com

Connect with Zain and follow her on Twitter: @employee