Chapter 17  GBPUSD: USD Falls, GBPUSD Rallies Slightly(7.11)


In the Asian session on Tuesday (July 11), the GBPUSD oscillated upwards and is currently trading near 1.2875 Yesterday, the GBPUSD fell sharply during the day, hitting a low of 1.2750. But overnight a number of Fed officials spoke in an overall dovish tone, and the dollar weakened, supporting the pound to the upside, and eventually closed at 1.2860 near the bottom with a long lower shadow line. The recent U.S. data has been rather contradictory, with a mixture of good and bad. Investors could focus on the CPI data this Wednesday, which may give a main trend for short-term trading.

What to watch for today: St. Louis Fed's James Bullard joins a online discussion on the U.S. economy and monetary policy.

General Situation: UK's GDP in April this year grew 0.2% MoM, in line with expectations, and higher than the previous value of -0.3%; GDP in April grew 0.5% YoY, higher than the previous value of 0.3%, and has not yet appeared in a technical recession as in Germany and the eurozone, with the overall situation being better than expected. However, against the background of a sharply tightening financial environment and generally pressured global demand, there are now strong recessionary warnings in the UK bond market. UK 2-year bond yield surged to levels well above the 10-year government bond, resulting in the worst inversion of the yield curve since 2000. Following the BoE's interest rate meeting in June, the divergence between short-end interest rates and Sterling's exchange rate movements also reflected concerns about the UK's economic outlook, triggered by a significant increase in interest rate levels. While a longer-lasting rate hike process with sharply rising UK government bond yields could provide some support to the pound, market concerns about the prospect of a potential UK recession could limit the pound's upside.

Technical Analysis

From the daily chart, the pound rebounded shockingly yesterday after the adjustment. The daily chart closed with a medium bull candle with a lower shadow, and the bullish momentum has slightly increased. The price is currently above the 5-, 10- and 20-day MAs and the MACD is running above the zero axis, remaining in a bullish trend. But the price is on the upper edge of the upward box, which needs to be alert to the possibility of retracement.

Intraday trading plan: It is recommended that aggressive traders try to go short with small positions around 1.2900, with the stop loss set at 1.3050. The first target is to take profit on a portion of the position at 1.2600 and traders can change the remaining positions to move the stop loss to breakeven.

GBPUSD: USD Falls, GBPUSD Rallies Slightly(7.11)-Pic no.1

Trading Recommendations

Trading direction: Short

Entry price: 1.2900

Target price: 1.2600

Stop loss: 1.3050

Support: 1.2600\1.2200

Resistance: 1.3050\1.3330

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