GBP/USD headed for a challenge of 1.3173

  • GBP/USD has been stablising after a sell-off from above the 1.3080 psychological level, (high 1.3087) and made a recent low of 1.2967 with the greenback scrambling back some lost ground and finding territory back to 95.35 from a low of 94.88.
  • The greenback got a boost in European trade and the pound was offered regardless of positive Brexit sentiment and solid data. 

"UK data revealed steady unemployment (4.0%) and a further pick up in wages, with weekly earnings ex-bonus payments reaching +2.9% in the Jul year. The Treasury also announced that BoE Gov. Carney would be remaining in position for a period beyond the expiration of his term next year to help see the economy though the Brexit process. Markets seem less than enthused. Sterling has found support from an improvement in the market’s mood around Brexit but we still think there are some significant hurdles to overcome (both within the UK and with the EU) before a “soft” Brexit is assured," analysts at Scotiabank explained. 

Looking ahead for the week

Looking ahead for the week, US PPI and CPI releases are key. A beat in the CPI expectations will only underpin the case for higher rates from the Fed. There are also real weekly earnings, retail sales and industrial production. However, what is more key for risk right now comes with the U.S. imposing extra tariffs on an additional $200 billion of imports from China - if investors start to price in the additional $267 billion that President Trump threatened on Friday, just hours before China reported another record trade surplus with the U.S, one might expect additional gains in the greenback. 

GBP/USD levels

"It increasingly looks to have based from a slightly longer term perspective recently at 1.2662. Above 1.3066 we look for a challenge of the 1.3173 July 30 high and the 1.3363 9 th July high. Minor resistance below this level comes in at the 1.3102 late June lows. A move above the 1.3363 July high would imply a deeper corrective phase to the 1.3473/1.3534 June high and 200 day moving average," analysts at Commerzbank explained

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