British Pound Forecast: GBP/USD Bearish Channel Intact – What to Watch Next

GBP/USD Key Points

Both the UK (2.2% y/y) and US (2.9% y/y) CPI reports came in a tick below expectations
Readers risk behind the curve by focusing on a storyline (inflation) that the market has moved on from in favor of the more relevant narrative (growth/employment)!
Traders may view any near-term GBP/USD dips toward the 50-day EMA near 1.2800 as buying opportunities.

There’s an interesting change afoot for US data watchers: As fears about a coordinated global slowdown rise, the importance of inflation data is fading slightly as traders shift their focus more to employment and consumer data. In other words, traders believe that a re-acceleration of inflation is no longer the biggest risk to the global economy.

This morning’s data underscores that point. Both the UK (2.2% y/y) and US (2.9% y/y) CPI reports came in a tick below expectations, but the evidence of additional disinflation toward the BOE and Fed’s respective targets has not led to as big of a market reaction as it would have a few months ago.

Instead, traders may be more focused on e.g. tomorrow’s US Retail Sales report and Friday’s UK Retail Sales reports for evidence on how the consumer is doing.

As a general point, any time the market’s focus is shifting, there is opportunity for quick-thinking traders to position themselves for the next narrative – don’t be caught behind the curve focusing on a storyline (inflation) that the market has moved on from in favor of the more relevant narrative (growth/employment)!

British Pound Technical Analysis – GBP/USD Daily Chart

Source: TradingView, StoneX

Looking at the daily chart, GBP/USD is testing a key resistance level near 1.2860. This level capped rallies in Cable in March and June, and as of writing, is serving as an area of selling pressure in today’s trade. From a broader view, GBP/USD remains in a long-term uptrend with the exchange rate above both the 200- and 50-day MAs, which are themselves trending higher.

Traders may therefore view any near-term dips toward the 50-day EMA near 1.2800 as buying opportunities. Ultimately, a break above the 1.2860 level could open the door for a continuation toward the 1.30 handle

-- Written by Matt Weller, Global Head of Research

Check out Matt’s Daily Market Update videos on YouTube and be sure to follow Matt on Twitter: @MWellerFX

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

The products and services available to you at FOREX.com will depend on your location and on which of its regulated entities holds your account.

FOREX.com is a trading name of GAIN Global Markets Inc. which is authorized and regulated by the Cayman Islands Monetary Authority under the Securities Investment Business Law of the Cayman Islands (as revised) with License number 25033.

FOREX.com may, from time to time, offer payment processing services with respect to card deposits through StoneX Financial Ltd, Moor House First Floor, 120 London Wall, London, EC2Y 5ET.

GAIN Global Markets Inc. has its principal place of business at 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA., and is a wholly-owned subsidiary of StoneX Group Inc.