GBPUSD Analysis – the pair is fundamentally bearish

The GBP/USD pair fell down to 1.3074, retracing all of its Monday gains, although better-than-expected UK inflation readings from June, helped the pair to bounce modestly. The GBP/USD pair spiked up to 1.3220 with the news, but is having a hard time to hold above the 1.3200 mark, as the dollar is generally stronger across the board. Technically, the pair maintains a neutral-to-bearish tone. Monday’s recovery rejection at 1.3312 and subsequent weakness that probed below 1.3200 support, shifted near-term focus lower for possible return to strong 1.3000 support zone. GBP/USD is currently trading at 1.3099, and is now only 99 points away from the psychologically important 1.3000 level.

Since last week the Sterling has been provided with an array of lifelines from the BoE's inaction to MPC member Martin Weale stating that there was no urgency to cut interest rates. Regardless of these events that have propped up the Sterling, prices are still fundamentally bearish and further declines could be expected as the toxic combination of lacklustre economic data and persistent post-Brexit uncertainty encourages investors to install another round of selling. Although UK CPI y/y exceeded expectations at 0.5% today, this did little to repel the Sterling bears from dragging prices lower.

Dollar sentiment is turning bullish towards the US economy and the repeatedly improving domestic data has bolstered expectations over the Federal Reserve raising US rates before year end. For an extended period, US data has followed a positive trajectory with June's impressive NFP report displaying signs of labour force reliance in a period of global instability. It seems that firm retail sales, GDP, and employment have fulfilled the domestic prerequisites needed for the Fed to take action. As long the price is below 1.4300 resistance level there is no indication of long trend reversal and this pair is in the "sell" zone, there could be a short term jump but first "BUY" signal would be if the price jumps above 1.4300 level (breaking below 1.3000 would open way to 1.2796 and then to 1.2700 level). The GBPUSD is fundamentally bearish and the growing divergence in monetary policy between the BoE and Fed could ensure that the pair remains depressed for an extended period of time.

Technical analysis
When we look at the monthly chart of this pair ( 12 years period) we can see strong " bearish" correction. On this monthly chart I marked support and resistance levels, 1.7000 and 1.4300 are long term resistance levels, 1.3000 represents strong support level. As long the price is below 1.4300 resistance level there is no indication of long trend reversal and this pair is in the "sell" zone ( there could be a short term jump but first "BUY" signal would be if the price jumps above 1.4300 level).



On this weekly chart we can also see that major trend is "bearish", price has dropped from 1.7000 level to 1.2796 level ( this level also represents strong support). On this chart I marked support and resistance levels, 1.4630 and 1.3850 represent resistance levels, 1.3000 represents strong support level. At the end of the chart we can see "bearish" candle, this could be indication that GBPUSD could fall more ( short term traders could find good "short" position on 15 min chart but short term traders should trade with "stop loss" and "take profit" orders). As long the price is below 1.3850 resistance level there is no indication of trend reversal and this pair is in the "sell" zone ( very strong "BUY signal" would if the price jumps above 1.4300 level and than we have a open way to 1.4630 resistance level). Breaking below 1.3000 would open way to 1.2796 and than to 1.2700 level.



On this daily chart we can see that GBP/USD bottomed at 1.2796 and after that returned above 1.3000 level ( psychological support level). Breaking below 1.3000 would open way to 1.2796 and than to 1.2700 level, breaking above 1.3500 level would open way to 1.3850 level (positions for short term traders). The GBPUSD is fundamentally bearish and the growing divergence in monetary policy between the BoE and Fed could ensure that the pair remains depressed for an extended period of time (1.3000 level seems the probable bearish target, breaking below 1.3000 would open way to 1.2796 and then to 1.2700 level). At the end of this chart we can see chart pattern "inverted head and shoulders", this pattern could be a indication of trend reversal.