Fundamental Drivers
United Kingdom
Recent economic data from the United Kingdom reveals that GDP growth for the second quarter increased by 0.3%, surpassing expectations of 0.2%. Despite this positive result, the growth rate has slowed compared to the 0.7% recorded in the previous quarter. The labor market has shown signs of weakness, with payrolls declining for six consecutive months. Nevertheless, wage growth continues to be robust, which has heightened concerns about persistent inflation pressures. Looking ahead, July’s Consumer Price Index (CPI) is anticipated to rise to 3.7% for the headline figure and 3.8% for the core figure, further fueling fears of stagflation. The Bank of England faces a complex policy environment, as it must weigh the challenges of high inflation against ongoing labor market weakness when making future interest rate decisions.
United States
In the United States, economic indicators are also pointing to stagflation risks. The most recent data shows the headline CPI at 2.7%, with core CPI increasing to 3.1%, indicating that inflation remains persistent. In addition, the political climate is contributing to market uncertainty, particularly with the Trump-Putin summit on the horizon and the possibility of tariffs being imposed on buyers of Russian oil. These developments are influencing sentiment toward the US dollar and adding to the overall uncertainty in global markets.
Technical Analysis
Support and Resistance Levels
Key support levels for GBP/USD are identified at 1.3366, 1.3144, and 1.3150, with intermediate support at 1.3452 and 1.3525. On the upside, resistance levels are observed at 1.3590 and 1.3690, while the short-term target range is set at 1.3785 to 1.3800.
Indicators
• MACD: The MACD is above zero, signaling continued bullish momentum.
• RSI: The Relative Strength Index is above 50, indicating upward price pressure.
• Moving Averages: The 50- and 100-period moving averages have formed a bullish crossover, which further supports the positive technical outlook.
Trading Scenarios
Bullish Setup
Traders looking for bullish opportunities may consider entering positions above 1.3550, with target levels at 1.3785, 1.3800, and 1.4000. Stop-loss orders are recommended below 1.3450 to manage downside risk.
Bearish Setup
For those anticipating a bearish move, selling below 1.3450 is suggested, with potential targets at 1.3366, 1.3150, and 1.2700. In this scenario, stop-loss orders should be placed above 1.3600.