GBP/USD Technical Analysis: Upward Rebound Needs Stimulation

For four trading sessions in a row, the price of the GBP/USD currency pair moves in an upward rebound path with gains extending to the 1.2746 resistance level. This is before settling around the 1.2720 level at the time of writing the analysis prior to the announcement of important American economic releases led by the announcement of the American inflation reading.

The negative results of the latest American economic data helped the sterling/dollar pair to recover cautiously. According to the official announcement, the initial American GDP for the second quarter violated the annual expectations of 2.4% by a rate of 2.1%. The initial index of GDP prices for this period also decreased to 2.2% at a rate of 2%. Initial personal consumption expenditure prices for the second quarter missed the expected change by 2.6% with a change of 2.5%, while core personal consumption expenditure fell below 3.8% with a change of 3.7%. Pending US home sales for July exceeded the estimated change by -0.6% with a change of 0.9% recorded.

The American economy – the largest in the world – has proven surprisingly resilient amid the aggressive campaign by the Federal Reserve Bank to eliminate the resurgence of inflation, which last year reached its highest level in four decades. Since March of last year, the Federal Reserve has raised the US interest rate 11 times, making borrowing for everything from cars to homes to business expansions much more expensive, leading to widespread expectations of a recession ahead.

In Britain, lending to individuals for July fell to 1.4 billion pounds from 1.7 billion pounds in the previous update, exceeding the expected figure of 1 billion pounds. On the other hand, mortgage approvals for the month exceeded the estimated figure by 50.5 thousand for a total of 49.444 thousand, while consumer credit missed by 1.3 billion pounds at 1.191 billion pounds.

• The GBP/USD currency pair continues to trade several levels above the 100-hour moving average despite the pullback.
• As a result, the currency pair is still trading near overbought RSI levels on the 14-hour frame.
• In the near term and according to the performance on the hourly chart, it seems that the GBP/USD currency pair is trading within the formation of a descending channel.
• The MACD indicates the dissipation of the upward momentum as it approaches the bearish intersection.

Therefore, the bears will target extended pullbacks around 1.2695 or lower at the 1.2671 support. On the other hand, the bulls will look to pounce on the rebounds at around 1.2739 or higher at 1.2762.

In the long term and according to the performance on the daily chart, it seems that the GBP/USD currency pair is trading within a bearish channel. However, the MACD seems to be about to complete a short-term crossover indicating a potential reversal. The bulls will therefore target long-term profits around 1.2809 or higher at the 1.2898 resistance. On the other hand, the bearish speculators will look to pounce on pullbacks around 1.2639 or lower at the 1.2547 support.

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