The GBPUSD currency pair reached a peak of 1.2818 during the week, but then declined below 1.2700, undoing those previous gains.

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• GBP/USD touched a weekly high of 1.2818 but paired those gains, plunging afterward below 1.2700.

The pair currently trades last at 1.26757.

The previous day high was 1.2782 while the previous day low was 1.2712. The daily 38.2% Fib levels comes at 1.2739, expected to provide resistance. Similarly, the daily 61.8% fib level is at 1.2755, expected to provide resistance.

With the release of US inflation data in the United States (US), exceeding the prior’s month reading but below estimations, the GBP/USD reacted upwards, reaching a fresh week high of 1.2818. Nevertheless, as US Treasury bond yields soared, the US Dollar (USD) is staging a comeback, as the GBP/USD exchanges hands at 1.2687, down 0.24%.

The US Bureau of Labor Statistics (BLS) revealed that prices during July in the US rose above the previous month’s 3% YoY but less than estimates of 3.3%, seen as a sign that prices are cooling down. The Consumer Price Index (CPI) rose by 3.2%. The same report showed that core CPI dipped to 4.7% YoY, below June’s and estimates of 4.8%, portraying the stickiness of the report.

Although the data is encouraging, the Federal Reserve (Fed) would remain data dependent, as the San Francisco Fed President Mary Daly commented that it’s too early to declare victory, stressing she remains data dependent, and backed July’s 25 bps rate hike. When asked about easing monetary conditions, she added it’s a “long way from a conversation about rate cuts.”

Further data revealed that the labor market gave another sign of easing, though it should be viewed cautiously, as the latest figures have not been consistent. Initial Jobless Claims for the week ending July 29 exceeded forecasts of 230K, advanced 248K.

After the data, traders slashed bets the Fed would raise rates again, as shown by money market futures. The CME FedWatch Tools portrays the chances for a rate hike in September below 10%, while for the November meeting, it dropped to 23.6% from 33.8% a month ago.

Given the backdrop, the GBP/USD rallied sharply. Still, market participants faded the move, as data from the United Kingdom is expected to show the country’s exit from the recessionary territory, as the Gross Domestic Product (GDP) for the last Quarter would be released. If the UK posts solid numbers, the GBP/USD might gain traction and retest the 1.2800 mark. Otherwise, the GBP/USD would resume its downtrend and extend its losses past the 100-day EMA, with traders eyeing the 200-day EMA.

GBP/USD’s failure to hold to its gains above 1.2800 offered sellers a better entry price as traders faded the uptick, exerting downward pressure on the pair. In addition, the GBP/USD printed a new weekly low, opening the door for a test of the August 3 daily low of 1.2620. A breach of the latter will expose the 100-day Exponential Moving Average (EMA) at 1.2605, followed by the 1.2600 psychological figure. On the other hand, the GBP/USD could retest 1.2800 if the buyers reclaim 1.2700.

Technical Levels: Supports and Resistances

GBPUSD currently trading at 1.2683 at the time of writing. Pair opened at 1.2719 and is trading with a change of -0.28 % .

The pair is trading below its 20 Daily moving average @ 1.2867, below its 50 Daily moving average @ 1.2757 , above its 100 Daily moving average @ 1.26 and above its 200 Daily moving average @ 1.2337

The previous day high was 1.2782 while the previous day low was 1.2712. The daily 38.2% Fib levels comes at 1.2739, expected to provide resistance. Similarly, the daily 61.8% fib level is at 1.2755, expected to provide resistance.

Note the levels of interest below:

• Pivot support is noted at 1.2693, 1.2668, 1.2623
• Pivot resistance is noted at 1.2763, 1.2808, 1.2834

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