GBP/USD Forecast: Sterling stuck in a downward sloping trend channel

GBP/USD Forecast: Sterling stuck in a downward sloping trend channel

  • The GBP/USD is trading flat at around 1.2720, unable to materialize gains stemming from strong UK macro data over the week.
  • The GBP/USD retreated from the 14-month low of 1.2666 but remains capped by 1.2750.

The GBP/USD remains stuck within a downward sloping trend trading little changed near 1.2700 level against the US Dollar after falling as low as 1.2666 on Wednesday this week that represents fresh 14-month low.

The US Dollar pulled back from cyclical highs early on Thursday as the news on the US and China getting back to trade negotiations hit the market and the US benchmark Treasury yields rose together with Wall Street indices rebounding strongly backed by corporate profit readings.

The US is said to press China to lift Yuan in trade talks commencing later in August, the New York Times reported.

Sterling was unable to materialize solid development of macroeconomic indicators, especially with a strong reading from the UK labor market and the unexpectedly strong rise of the UK retail sales in July. 

The UK labor market remained strong in July with wage growth stabilizing and the unemployment rate dropped to 4.0%, the lowest since February 1975. At the same time, the average weekly earnings increased by 2.7% y/y excluding bonuses, and by 2.4% including bonuses in June.

Sterling is still trapped in the downward sloping trend channel and as the currency pair broke below 1.2755 representing 100% retracement of the move from 1.2755 to a cyclical high of 1.4377 reached on April 12 this year, the new low of below 1.2666 is the next target.

Technical oscillators on daily chart including the Relative Strength Index and Slow Stochastics moved to the oversold territory and look set for the crossover higher. This is supported by Momentum, that has already moved higher indicating short-term correction after reaching the near-term target at 1.2680 representing 23.6% Fibonacci retracement of the post-Brexit slump from 1.5020 to 1.1940. The GBP/USD is facing immediate resistance on the upside at 1.2755 with a break above 1.2755 seen testing  1.2800. 

GBP/USD daily chart

  • The GBP/USD is trading flat at around 1.2720, unable to materialize gains stemming from strong UK macro data over the week.
  • The GBP/USD retreated from the 14-month low of 1.2666 but remains capped by 1.2750.

The GBP/USD remains stuck within a downward sloping trend trading little changed near 1.2700 level against the US Dollar after falling as low as 1.2666 on Wednesday this week that represents fresh 14-month low.

The US Dollar pulled back from cyclical highs early on Thursday as the news on the US and China getting back to trade negotiations hit the market and the US benchmark Treasury yields rose together with Wall Street indices rebounding strongly backed by corporate profit readings.

The US is said to press China to lift Yuan in trade talks commencing later in August, the New York Times reported.

Sterling was unable to materialize solid development of macroeconomic indicators, especially with a strong reading from the UK labor market and the unexpectedly strong rise of the UK retail sales in July. 

The UK labor market remained strong in July with wage growth stabilizing and the unemployment rate dropped to 4.0%, the lowest since February 1975. At the same time, the average weekly earnings increased by 2.7% y/y excluding bonuses, and by 2.4% including bonuses in June.

Sterling is still trapped in the downward sloping trend channel and as the currency pair broke below 1.2755 representing 100% retracement of the move from 1.2755 to a cyclical high of 1.4377 reached on April 12 this year, the new low of below 1.2666 is the next target.

Technical oscillators on daily chart including the Relative Strength Index and Slow Stochastics moved to the oversold territory and look set for the crossover higher. This is supported by Momentum, that has already moved higher indicating short-term correction after reaching the near-term target at 1.2680 representing 23.6% Fibonacci retracement of the post-Brexit slump from 1.5020 to 1.1940. The GBP/USD is facing immediate resistance on the upside at 1.2755 with a break above 1.2755 seen testing  1.2800. 

GBP/USD daily chart