Current trend

The GBP/USD pair is showing minor growth, correcting after a rather long "bearish" rally on July 17, when quotes were at record July highs of last year. Now the instrument is again testing 1.2700 for a breakout, but there are not enough fundamental factors for the positive dynamics of the British currency. The market is only correcting after a sharp drop on Monday amid a mass exit of investors from carry trades following growing concerns about a slowdown in the global economy.

The US dollar reacted to the release of July labor market data on Friday, which led to a revision in forecasts for the pace of possible cuts in the US Federal Reserve's borrowing costs for the rest of the year. Currently, analysts expect the regulator to adjust the interest rate in September by –50 basis points, and the probability of such a scenario is estimated at approximately 80.0%. The Bank of England last week decided to reduce the rate by 25 basis points, noting its readiness to continue adjusting monetary policy following the weakening of inflation risks.

The pound received some support the day before from macroeconomic statistics: British Retail Consortium (BRC) Like-For-Like Retail Sales rose 0.3% in July after falling 0.5% in the previous month, while the Construction PMI rose to 55.3 points from 52.5 points, compared with a forecast of 52.7 points, the fastest pace in two years, driven by growth in residential and commercial building. Thus, all key sectors of the national economy are becoming more active, helping to maintain the risks of accelerating inflation and allowing the Bank of England to move to a more cautious approach to reducing borrowing costs.

Support and resistance

Bollinger Bands on the daily chart show a steady decline. The price range is expanding from below, but it is not keeping up with the current activity of the "bears". MACD is going down preserving a stable sell signal (located below the signal line). Stochastic, having reverses downwards again after an unsuccessful attempt at growth, is located in close proximity to the level of "20" and indicates the risks of the pound being oversold in the ultra-short term.

Resistance levels: 1.2730, 1.2776, 1.2817, 1.2860.

Support levels: 1.2700, 1.2650, 1.2600, 1.2568.

Trading tips

Long positions can be opened after a breakout of 1.2730 with the target of 1.2817. Stop-loss — 1.2690. Implementation time: 2-3 days.

A rebound from 1.2730 as from resistance, followed by a breakdown of 1.2700 may become a signal for opening of short positions with the target at 1.2600. Stop-loss — 1.2750.