Forex Analysis & Reviews: 22.07.2023 - Weekly review of GBP/USD for...

22.07.2023 11:44 PM

Weekly review of GBP/USD for July 22, 2023

Weekly review bteween 17th and 21st of July, 2022.

The British pound continues to rally against the US dollar. GBP/USD has risen to 1.3140, up 1%. The pound hit a two weeks high earlier and is up 1.66% this week. The pound has continued to trend higher against the dollar on the back of the data in recent days, breaking through a big psychological barrier in the process.

The break of 1.2997 is a very bullish move after what has already been a strong couple of weeks for the currency, the GBP/USD pair has broken resistance at the level of 1.2997 which acts as support now. Thus, the pair has already formed minor support at 1.2997. The strong support is seen at the level of 1.2997 because it represents the weekly support 1.

The European Central Bank and the Bank of England, the two key central banks in Europe, have announced their intention to maintain a hawkish monetary policy. The Bank of England's decision is primarily driven by the high inflation figures, which reached 8.7% year-on-year (consumer) and 5.1% year-on-year (core) based on May readings. Equally important, the RSI and the moving average (100) are still calling for an uptrend.

Therefore, the market indicates a bullish opportunity at the level of 1.3078 in the H1 chart. Also, if the trend is buoyant, then the currency pair strength will be defined as following: GBP is in an uptrend and USD is in a downtrend. Buy above the minor support of 1.3078 with the first target at 1.3078, and continue towards 1.3141 (the weekly resistance 1).

Consequently, the Bank of England authorities have no option but to consider raising interest rates significantly, potentially up to 6.5%.The situation in the eurozone appears slightly better, with consumer inflation at 5.5% year-on-year.

However, Christine Lagarde and other members of the Governing Council emphasize that there is still substantial work to be done to bring inflation down to the targeted level. According to the latest forecasts, it is expected that inflation will only reach the desired range in 2023.

On the other hand, if the price closes below the minor support, the best location for the stop loss order is seen below 1.2997; hence, the price will fall into the bearish market in order to go further towards the strong support at 1.2934 to test it again.

Furthermore, the level of 1.2934 will form a double bottom. The GBP/USD pair sets on the back foot in the American session and continues to decline from the area of 1.3141 - 1.3089. Renewed US Dollar strength following the latest macroeconomic data releases from the US weighs on the pair ahead of Tuesday's key UK inflation data.

The British pound has gone back and forth during the trading session on Tuesday, as we continue to see a lot of consolidation. The GBP/USD's consolidation from 1.3141 is in progress. Intraday bias remains neutral and deeper retreat could be seen. But downside should be contained below th spot of 1.3141 - 1.3089 resistance turned support to bring rise resumption.

The lower-limit of the ascending regression channel and the 50-period Simple Moving Average (SMA) form key pivot level at 1.3050. If the pair stays below that level and continues to use it as resistance, 1.3141 (static level) could cat as next support ahead of 1.2994. In case GBP/USD manages to stabilize above, it could stretch higher toward 1.3141 (static level, mid-point of the ascending channel) and 1.3050 (psychological level).

If the pair fails to pass through the level of 1.3050 ,the market will indicate a bearish opportunity below the strong resistance level of 1.3050. In this regard, sell deals are recommended lower than the 1.3050 level with the first target at 1.3000. It is possible that the pair will turn downwards continuing the development of the bearish trend to the level 1.2903.

However, stop loss has always been in consideration thus it will be useful to set it above the last double top at the level of 1.3141 (notice that the major resistance has set at 1.3141). On the upside, break of 1.3141 will resume larger up trend and target of 1.3200 to 1.3225 from 1.3250 at 1.3288 next.

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*Disclaimer: The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.