GBP/USD Susceptible to Break of August Opening Range

US Dollar Outlook: GBP/USD

GBP/USD holds within the opening range for August as it gives back the rebound from the monthly low (1.2621), but data prints coming out of the US may drag on the exchange rate as the US Consumer Price Index (CPI) is anticipated to show sticky inflation.

GBP/USD Susceptible to Break of August Opening Range

GBP/USD bounces around the 50-Day SMA (1.2756) after registering a fresh yearly high (1.3143) during the previous month, and the exchange rate may try to track the positive slope in the moving average if it clears the opening range for August.

Join David Song for the Weekly Fundamental Market Outlook webinar. David provides a market overview and takes questions in real-time. Register Here

US Economic Calendar

FOREX.com Economic Calendar

However, data prints coming out of the US may sway GBP/USD as the headline CPI is anticipated to increase to 3.3% in July from 3.0% per annum the month prior while the core rate is expected to hold steady at 4.8% during the same period.

Signs of persistent price growth may spark a bullish reaction in the US Dollar as it raises the Federal Reserve’s scope to further combat inflation, but a softer-than-expected CPI print may prop up GBP/USD as it fuels speculation for a looming change in US monetary policy.

Source: CME

According to the CME FedWatch Tool, market participants are pricing a greater than 70% of seeing US interest rates unchanged over the remainder of the year, and it remains to be seen if Chairman Jerome Powell and Co. will adjust the forward guidance at the next interest rate decision on September 20 as the central bank is slated to update the Summary of Economic Projections (SEP).

With that said, GBP/USD may try to track the positive slope in the 50-Day SMA (1.2756) should it clear the opening range for August, but the exchange rate may struggle to retain the advance from the June low (1.2369) if it fails to defend the monthly low (1.2621).

GBP/USD Price Chart –Daily

Chart Prepared by David Song, Strategist; GBP/USD on TradingView

• GBP/USD bounces around the 50-Day SMA (1.2756) as it holds within the opening range for August, and the exchange rate may try to track the positive slope in the moving average if it clears the monthly high (1.2842).
• A break/close above the 1.2850 (61.8% Fibonacci extension) to 1.2900 (23.6% Fibonacci retracement) region brings the 1.3000 (78.6% Fibonacci extension) handle back on the radar, with the next area of interest coming in around 1.3140 (61.8% Fibonacci extension) to 1.3210 (50% Fibonacci extension).
• However, GBP/USD may struggle to retain the advance from the June low (1.2369) if it fails to defend the monthly low (1.2621), with a close below the 1.2640 (38.2% Fibonacci extension) to 1.2650 (38.2% Fibonacci extension) area raising the scope for a move towards 1.2520 (23.6% Fibonacci extension) on the radar.

Additional Market Outlooks

AUD/USD Rate Reaction to June Low in Focus

USD/CAD Rate Forecast: All Eyes on US CPI Report

--- Written by David Song, Strategist

Follow on Twitter at @DavidJSong