The British pound has rallied a bit during the early session on Tuesday as we continue to see a lot of noisy behavior.
With that being said, I’ll be watching the top of the inverted hammer from the session on Monday, and if we can break above that then we could challenge the 50 Day EMA.
At this point in time, then you would have a potential run toward the ¥198 level.
The ¥198 level was previous support that we broke through rather viciously, so I would anticipate a bit of trouble in that area.
Technical Analysis
The technical analysis for this market is a bit dicey at the moment as the recent selling has put a lot of questions into whether or not the uptrend can continue. That being said, the 200 Day EMA currently sits at the ¥194.25 level, and should offer a certain amount of support. All things being equal, this is a market that I think if we can stay above the 200 Day EMA, then market participants will probably continue to look at this through the prism of trying to stay afloat.
However, if we break down below the 200 Day EMA, it’s likely that the British pound will continue much lower, perhaps down to the ¥187.50 level. On the other hand, if we recapture the 50 Day EMA to the upside, then I think we could even go as high as ¥200, but I recognize that it is swimming upstream as far as the recent action is concerned. Remember, this is a pair that is highly sensitive to risk appetite, so you need to be cautious as to what the rest of the world is doing when you trade this pair. After most of the indices are rallying, then it makes a certain amount of sense that the Japanese yen losing strength against the British pound and we rise. That being said, there’s a lot of fear out there at the moment, and it is causing a bit of a headache.
Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.
The GBP/USD forecast remains mildly positive ahead of BoE’s rate decision.
UK macroeconomics keep clouding the overall outlook of the pound.
MPC vote split is important to watch along with the BoE’s rate decision.
The GBP/USD forecast has turned slightly positive as the pair managed to reclaim the 1.3300 handle on Wednesday ahead of the Bank of England’s key rate decision on Thursday. Despite the mild gains, the sentiment remains cautious as traders weigh weaker UK data.
The UK’s central bank is widely expected to reduce the interest rates by 25 bps to 4.0%, with more rate cuts to follow later this year. The decision comes at a time when the inflation remains stubbornly high, around twice the 2% target of BoE. Meanwhile, the signs of economic slowdown are keeping policymakers under pressure to support growth.
A major concern is the UK’s construction sector, which showed the sharpest contraction in over five years. The construction PMI dropped to 44.3 in July, down from June’s 48.8. This is the lowest reading since May 2020, during the pandemic peak.
This, combined with softer economic data, has strengthened the odds of BoE’s rate cut. Though high inflation discourages central banks from cutting rates, the priority seems to be supporting growth in the short term. The recent move of the pound shows a complex balance of forces, including loose monetary policy, higher inflation, and downbeat economic data. Despite the short-term optimism, the overall outlook remains clouded by macroeconomics.
All eyes are now on Thursday’s BoE decision, which could set the tone for GBP/USD in the coming weeks. A dovish tone or deeper-than-expected cut may put further pressure on the pound, while a more cautious approach could offer temporary relief.
GBP/USD Technical Forecast: Bulls Aiming for 1.3370
GBP/USD 4-hour chart
The 4-hour chart for the GBP/USD pair shows a slight bullish momentum, staying above the 20-period SMA. The price is gradually moving up to test the previously broken support that acts as a resistance around 1.3370. The ultimate target lies at the 200-period MA near 1.3500. Above this level, the bias will be turned strongly bullish.
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The RSI has also moved above the 50.0 mark, suggesting room for more gains. However, the momentum is not strong enough and lacks a catalyst to push beyond the cluster of resistance levels.
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The (Brent) price rose in its last intraday trading, due to the stability of the critical support level at $67.50, providing positive momentum that assisted it to achieve these gains, with the emergence of the positive signals on the (RSI), after reaching oversold levels.
This performance comes amid the price’s affection by breaking bullish trend line on the short-term basis, with the continuation of the negative pressure that comes from its trading below EMA50, forming dynamic resistance that prevents any recovery attempt on the near-term basis.
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EUR/USD stabilizes below 1.1600 in the European session on Wednesday.
The technical picture offers no signs of a buildup in directional momentum.
Several Fed policymakers will be delivering speeches later in the day.
After failing to make a decisive move in either direction on Tuesday, EUR/USD extends its sideways grind early Wednesday and continues to move up and down in a very narrow channel below 1.1600. The technical outlook points to a neutral stance in the near term.
Euro PRICE This week
The table below shows the percentage change of Euro (EUR) against listed major currencies this week. Euro was the strongest against the Swiss Franc.
USD
EUR
GBP
JPY
CAD
AUD
NZD
CHF
USD
0.16%
0.00%
0.38%
-0.08%
-0.19%
-0.14%
0.45%
EUR
-0.16%
-0.10%
0.24%
-0.23%
-0.48%
-0.30%
0.29%
GBP
-0.01%
0.10%
0.37%
-0.13%
-0.38%
-0.20%
0.39%
JPY
-0.38%
-0.24%
-0.37%
-0.45%
-0.72%
-0.53%
0.24%
CAD
0.08%
0.23%
0.13%
0.45%
-0.27%
-0.06%
0.51%
AUD
0.19%
0.48%
0.38%
0.72%
0.27%
0.18%
0.77%
NZD
0.14%
0.30%
0.20%
0.53%
0.06%
-0.18%
0.57%
CHF
-0.45%
-0.29%
-0.39%
-0.24%
-0.51%
-0.77%
-0.57%
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
The Institute for Supply Management (ISM) reported on Tuesday that the Services Purchasing Managers’ Index (PMI) declined to 50.1 in July from 50.8 in June, showing a modest expansion in the US service sector’s economic activity. The Employment Index of the PMI survey fell to 46.4 from 47.2 in this period, highlighting a further decline in the sector’s payrolls. Finally, the Prices Paid Index, the inflation component, climbed to 69.9 from 67.5.
The mixed PMI report failed to trigger a noticeable market reaction and the US Dollar (USD) Index ended the day flat on Tuesday.
Early Wednesday, US stock index futures gain between 0.3% and 0.4%, making it difficult for the safe-haven USD to gather strength.
Earlier in the session, the data from Germany showed Factory Orders declined by 1% on a monthly basis in June. This reading followed the 1.4% contraction recorded in May and missed analysts’ estimate for an increase of 1%.
In the second half of the day, several Federal Reserve (Fed) policymakers will be delivering speeches.
According to the CME FedWatch Tool, markets are currently pricing in a nearly-90% probability of a 25 basis points Fed rate cut in September. In case Fed officials downplay the weak July employment data and push back against this market expectation, the USD could gain traction and cause EUR/USD to turn south. On the flip side, the market positioning suggests that the USD doesn’t have a lot of room left on the downside even if policymakers hint at a September cut.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator moves sideways slightly above 50 and EUR/USD continues to fluctuate near the 20-period and the 50-period Simple Moving Averages (SMAs), reflecting a neutral bias.
On the downside, 1.1540 (Fibonacci 38.2% retracement of the latest uptrend) aligns as the first support level before 1.1500 (static level, round level) and 1.1450 (Fibonacci 50% retracement of the latest uptrend).
Looking north, resistance levels could be spotted at 1.1620 (100-period SMA), 1.1660 (Fibonacci 23.6% retracement, 200-period SMA) and 1.1700 (static level, round level).
Euro FAQs
The Euro is the currency for the 19 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day.
EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy.
The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa.
The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control.
Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency.
A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall.
Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period.
If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
The (Brent) price rose in its last intraday trading, due to the stability of the critical support level at $67.50, providing positive momentum that assisted it to achieve these gains, with the emergence of the positive signals on the (RSI), after reaching oversold levels.
This performance comes amid the price’s affection by breaking bullish trend line on the short-term basis, with the continuation of the negative pressure that comes from its trading below EMA50, forming dynamic resistance that prevents any recovery attempt on the near-term basis.
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The (ETHUSD) price declined in its last intraday trading, due to the continuation of the negative pressure that comes from its trading below EMA50, forming a dynamic resistance that prevent the recovery on the near term basis, amid the dominance of the bearish correctional dominance on the short-term basis, and its trading alongside a supportive bias line for the trend, with the emergence of the negative signals on the (RSI), despite reaching oversold levels.
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Despite the strong negative pressure on coffee prices due to its stability below the support of the broken minor channel’s support at 311.00 besides providing negative momentum by the main indicators, but its stability above the support base at 276.70 supports the chances for forming bullish waves, to fluctuate near 297.50.
Stochastic attempt to provide positive momentum that will increase the chances for targeting 311.00 level, surpassing it is important for regaining the bullish bias, then begin recording several gains by its rally to 328.00.
The expected trading range for today is between 284.00 and 311.00
The GBPJPY pair repeated its fluctuation below the barrier at 196.60 level, forcing it to activate with stochastic negativity, forming new bearish waves to press on the moving average 55 at 195.35.
We expect forming sideways trading, but its repeated negative stability below 196.60 confirms its surrender to the bearish scenario, which forces it to suffer extra losses by reaching 194.55 followed by 50%Fibonacci correction level at 194.10.
The expected trading range for today is between 194.10 and 196.00
Until gold breaks out of the triangle consolidation pattern, it will be trading inside the range. Since the range has been narrowing volatility has been declining. This can also be observed by the convergence of the two moving averages. That may be a clue that a potential spike in volatility is getting closer. The pattern is within a bull trend and near the top of the trend. Therefore, the expectation is for a bull breakout unless there are signs of pattern failure.
Notice that the pattern is an expansion of an original symmetrical triangle that is marked by dotted trendlines. Even though the earlier and smaller triangle had false breakouts, it is not unusual for a consolidation pattern to expand or evolve into another pattern. That doesn’t invalidate the current pattern.
Rising to Top of Pattern
Today’s bullish price action shows a continuation of an advance that targets the upper boundary of triangle. Key support would then be around the two moving averages and of course the price they represent will change. A triangle breakout is first indicated on a rise above the most recent swing high of $3,439 and further on a move above $3,451. Both price levels are also prior monthly highs and therefore a monthly breakout will also occur.
Breakout Above $3,439
An initial new high target zone is indicated from around $3,3578 to $3,603 if a bullish breakout is sustained. Given the narrowing of the price range over several months, an upside breakout should be accompanied by a spike in momentum. If not, it could be a warning sign, as seen with the earlier and smaller triangle breakout.
For a look at all of today’s economic events, check out our economic calendar.
Can Hotter Forecasts from NatGasWeather Spark a Rally?
Weather remains a pivotal factor. According to NatGasWeather, U.S. demand is expected to be moderate through Thursday before a hotter pattern emerges. Highs in the mid-80s to 100s across much of the country are forecast for late this week and into next, potentially boosting cooling demand.
However, current conditions remain milder than ideal for strong rally attempts. Traders are weighing whether this upcoming heat will be enough to sustain prices above the psychological $3.00 level, especially with robust supplies still in play.
Production and Storage Oversupply Continue to Undermine Bulls
Monday’s selloff — a 15.1-cent drop to $2.932 — was fueled by a mix of bearish fundamentals. U.S. dry gas production hit 108.1 Bcf/d Monday, up 3.5% year-over-year, while demand fell 8% to 74.2 Bcf/d, according to BNEF.
Storage is another headwind: the latest EIA report showed a +48 Bcf injection, outpacing the five-year average of +24 Bcf, and pushing inventories to 6.7% above seasonal norms. The fall shoulder season also looms, historically a soft period for demand.
Baker Hughes Rig Count and LNG Exports Send Mixed Signals
The Baker Hughes rig count adds further pressure, with gas rigs rising by two to 124 — the highest in two years — signaling continued production strength. At the same time, LNG export flows remain elevated at 15.3 Bcf/d, up 6.8% week-over-week, offering some relief to domestic balances.
Meanwhile, Edison Electric Institute data showed an 8.1% year-over-year increase in power generation for the week ending July 26, potentially supporting incremental gas burn for utilities.
