Current trend

The GBP/USD pair is moving within the medium-term downward trend, trading at 1.2120 supported by strong macroeconomic statistics.

The service PMI corrected from 49.5 points to 49.3 points instead of the expected significant decline to 47.2 points, and the composite indicator from 48.6 points to 48.5 points compared to the predicted 46.8 points. The rate of slowdown in indicators was very insignificant compared to expert calculations, as a result of which the decline in the national economy may not be so deep. Analysts note that many companies have become more optimistic about the prospects due to a significant decrease in inflation and improved demand.

However, the current strengthening of the pound is likely to be short-lived due to the prospect of further tightening of monetary policy by the US Federal Reserve. Unlike the Bank of England, which, according to experts, has already completed the cycle of tightening monetary policy, officials of the American regulator may raise interest rates again before the end of this year against a strong labor market and stable business activity. The likelihood of a new increase in borrowing costs will help strengthen the dollar’s position against its main competitors.

Support and resistance

The trading instrument is testing 1.2085 (Murrey level [–1/8], Fibonacci correction 38.2%), a breakdown of which downwards will allow it to fall to the area of 1.1962 (Murrey level [–2/8]) and 1.1800 (the area of March lows). The key “bullish” level is 1.2329 (Murrey level [1/8], the middle line of Bollinger Bands), if it is overcome, growth may continue to the area of 1.2490 (Fibonacci correction 50.0%) and 1.2573 (Murrey level [3/8]).

Technical indicators reflect a continued downward trend in the market: Bollinger Bands and Stochastic are directed downwards, and the MACD histogram is increasing in the negative zone.

Resistance levels: 1.2329, 1.2490, 1.2573.

Support levels: 1.2085, 1.1962, 1.1800.

Trading tips

Short positions may be opened below 1.2085 with the targets at 1.1962, 1.1800 and stop loss around 1.2170. Implementation time: 5–7 days.

Long positions may be opened above 1.2329 with the targets at 1.2490, 1.2573 and stop loss around 1.2250.