{x} | Trading.live

Abstract: The GBPUSD retraced its intraday gains to below 1.2800 during the European session. An across-the-board rally in the USD pressured the GBPUSD, but the downside appeared limited due to the market's high-risk sentiment.

Fundamentals

The recent economic data in the UK are mixed, and the wage increase rate has greatly accelerated, but the expected slowdown in inflation is an important factor for the GBP to remain under pressure; At the same time, the full rebound of the USD put the GBPUSD under pressure.

Although the Bank of England (BOE) is relieved by the latter, it will still be worrying about the former, because even if the wage growth is close to these levels, it is not consistent with the goal of a sustainable return to inflation in the medium term.

The new data released by the Office for National Statistics of the UK seems to indicate that the rising speed of core inflation is not as fast as the consumer price index data shows. According to reports, the more complicated method concluded that the core price rose by 6.8% last month, which was lower than the 7% last month and 7.3% the previous month.

The official data in July was slightly as high as 6.9%, but it was lower than 7.1% in May. Therefore, the new calculation method shows that the core inflation rate was low last month and decreased faster. This will give the BOE hope that the price pressure is easing, and they are expected to take more actions for the rest of this year.

As far as the GBP is concerned, we have noticed that there is still no obvious directional deviation of the GBPUSD in the near future, and it is expected that the GBPUSD will be consolidating in the range of 1.2720-1.2830 in the short term.

The GBPUSD quickly retreated its intraday gains after slightly testing above 1.2800 in Europe. We don't know whether this will prove to be a recovery of the upward trend, just a bearish consolidation, or just an early sign of accelerating the rise. However, if the decline expands below 1.2720, this may be seen as another bearish signal. If not, it will be the last time to test the bottom of the range and then accelerate higher.

Technical Analysis

The GBPUSD has formed an upward trend of higher highs and higher lows since the level of 1.2617 at the bottom of the test range and recently withdrew from the bearish channel.

The GBPUSD accelerated higher on Tuesday on the back of a breakout of the downside pressure line and the 20-day SMA, meeting strong resistance in the European session as it extended above the 50-day SMA at 1.2790. The SMA provided strong resistance earlier in the month; meanwhile, in the near term, any gains are unlikely to threaten the major resistance at 1.2830, a headwind the GBPUSD faced during the European session as it tested key resistance.

Technically, the bulls seem to have more upside as the Relative Strength Index re-crosses the threshold of 50, and the fast EMA and slow EMA of MACD continue to cross upwards. However, only a clear close above 1.2830 will push the price to a quick rally to the 1.2940-1.3000 limit range.

On the other hand, if the bulls continue to be rejected near 1.2800 and fall back below the 20-day SMA at 1.2750, support will probably be found initially around 1.2720 - 1.2700, with the decline extending further below 1.2700 - 1.2665, and the short-term uptrend may be suspended. This would also mean that the GBPUSD is once again in consolidation.

Overall, the GBPUSD showed a bullish trend in the short term, but at the same time, the upward strength was also strongly blocked. If bulls want to go higher, they may need to test the 1.2720 range at the bottom of the range again and rebound quickly to accelerate to move higher. It is recommended to buy the dips.

Trading Recommendations

Trading direction: Long

Entry price: 1.2720

Target price: 1.2974

Stop loss: 1.2590

Deadline: 2023-09-05 23:55:00

Support: 1.2750, 1.2720, 1.2687

Resistance: 1.2800, 1.2830, 1.2873