GBP/USD prices, analysis and charts
• GBP/USD he slipped up a bit on friday
• Weakness in EUR/USD seems to have transferred
• However, the overall upward trend appears intact
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The British pound is weaker against a generally stronger US dollar on Friday as weak European economic data underscores global grow uncertainties and are driving jittery investors back to the safe haven of the dollar. The Bank of England’s nonsensical half-percentage-point rate hike from the previous session beat expectations but, perhaps surprisingly, failed to lift Sterling back above the 14-month highs of June 16. Markets fear the Bank of England may have to push the UK economy into recession if it is to successfully curb domestic inflation which ranks among the most stubbornly high of all developed markets.
That economy was more resilient than forecasters feared earlier this year, but that very strength is now pushing up inflation and making it more likely that rates will have to rise much further. Official data on Friday showed a surprise rise in retail sales, lifted by a warm start to summer and a drop in fuel prices. Despite this week’s BoE action, Friday’s European money market focused on the euro. Dismal PMI readings for Germany and the wider eurozone weighed on the single currency, sending the pound lower. Manufacturing activity continued to decline in June, the data showed, with services sectors growing at a very subdued pace.
The pound could be set for a period of ebb and flow American dollar demand rather than trading on one’s own merits or lack thereof. That’s because the coming week will offer very few early UK economic numbers. The only big news coming in is the final official snapshot of gross domestic product for the first quarter. It is expected to be revised lower to show annualized growth of 0.2% from the original 0.6%.
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How to trade GBP/USD
GBP/USD Technical Analysis
Chart built using trading view
GBP/American dollar it remains a broad upward bias within the uptrend channel that began on March 20 and is in any case just an extension of the rally seen since the lows of September last year. The pair have managed to rise above the top of the channel in the past few weeks, but haven’t looked very comfortable there and are now back below it. This channel top now offers resistance at 1.27788.
Short-term support is likely at the May 8 intraday high of 1.26479 and the June 8 closing high of 1.25219. Below that will be the first Fibonacci retracement of the uptrend to this month’s highs from last September’s lows. This comes in at 1.22507 and a test of it would mean that the current uptrend has completely failed. Still, there are no signs of that happening yet, and the pair is likely to remain biased higher even if it sees setbacks within the uptrend. They could be quite labeled without negating it.
IG’s own sentiment indicator suggests that some pullback and consolidation are likely. Traders on the platform are slightly bearish on Sterling, which is perhaps not so surprising given GBP/USD’s current elevated levels.
–By David Cottle for DailyFX