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Fundamentals

In the Asian session on Tuesday (July 11), the GBPUSD oscillated upwards and is currently trading near 1.2875 Yesterday, the GBPUSD fell sharply during the day, hitting a low of 1.2750. But overnight a number of Fed officials spoke in an overall dovish tone, and the dollar weakened, supporting the pound to the upside, and eventually closed at 1.2860 near the bottom with a long lower shadow line. The recent U.S. data has been rather contradictory, with a mixture of good and bad. Investors could focus on the CPI data this Wednesday, which may give a main trend for short-term trading.

What to watch for today: St. Louis Fed's James Bullard joins a online discussion on the U.S. economy and monetary policy.

General Situation: UK's GDP in April this year grew 0.2% MoM, in line with expectations, and higher than the previous value of -0.3%; GDP in April grew 0.5% YoY, higher than the previous value of 0.3%, and has not yet appeared in a technical recession as in Germany and the eurozone, with the overall situation being better than expected. However, against the background of a sharply tightening financial environment and generally pressured global demand, there are now strong recessionary warnings in the UK bond market. UK 2-year bond yield surged to levels well above the 10-year government bond, resulting in the worst inversion of the yield curve since 2000. Following the BoE's interest rate meeting in June, the divergence between short-end interest rates and Sterling's exchange rate movements also reflected concerns about the UK's economic outlook, triggered by a significant increase in interest rate levels. While a longer-lasting rate hike process with sharply rising UK government bond yields could provide some support to the pound, market concerns about the prospect of a potential UK recession could limit the pound's upside.

Technical Analysis

From the daily chart, the pound rebounded shockingly yesterday after the adjustment. The daily chart closed with a medium bull candle with a lower shadow, and the bullish momentum has slightly increased. The price is currently above the 5-, 10- and 20-day MAs and the MACD is running above the zero axis, remaining in a bullish trend. But the price is on the upper edge of the upward box, which needs to be alert to the possibility of retracement.

Intraday trading plan: It is recommended that aggressive traders try to go short with small positions around 1.2900, with the stop loss set at 1.3050. The first target is to take profit on a portion of the position at 1.2600 and traders can change the remaining positions to move the stop loss to breakeven.

Trading Recommendations

Trading direction: Short

Entry price: 1.2900

Target price: 1.2600

Stop loss: 1.3050

Support: 1.2600\1.2200

Resistance: 1.3050\1.3330