The recent slowdown in U.S. inflation and a cooling labour market have sparked investor confidence in the potential for the Federal Reserve to cut interest rates. This shift in sentiment has led to a bearish outlook on the dollar in the market, driving key currency pairs towards critical levels that could trigger new medium-term trends.
Technical analysis of GBP/USD points to a potential retest of the July high at 1.3050, with a strong upward momentum building on the daily timeframe following a bullish engulfing pattern. If buyers can maintain a hold above 1.3000, the price may push towards last year’s highs around 1.3140-1.3100. Conversely, a rejection from 1.3000 could result in a corrective decline towards 1.2900-1.2800. Key events that could impact GBP/USD pricing include a speech by FOMC member Bostic, UK Public Sector Net Borrowing data, and the release of FOMC meeting minutes.
Volatility remains high in yen pairs, with GBP/JPY experiencing significant fluctuations. After a sharp rise in July, yen sellers have managed to recoup some losses. Technical analysis suggests the potential for further decline, as a bearish harami pattern has emerged following a bounce from 192.00. If the recent low at 188.30 is breached, the downtrend may continue towards 186.00-184.00. However, a rise above 192.00 could signal a deeper upward correction. Key news impacting GBP/JPY includes Japan’s Trade Balance data and Import and Export figures for July.
Market sentiment towards the dollar has shifted due to concerns about U.S. inflation and the labour market, leading investors to anticipate a possible interest rate cut by the Federal Reserve. This has influenced the performance of key currency pairs like GBP/USD and GBP/JPY, creating opportunities for traders to capitalize on emerging trends.
Overall, the current market conditions present a mix of uncertainty and potential for significant movements in currency pairs. It is essential for traders to stay informed about key economic indicators and news events that could impact the direction of GBP/USD and GBP/JPY. By closely monitoring technical analysis and market sentiment, traders can make well-informed decisions to navigate the volatile currency markets effectively.