The GBP/USD pair has lost its bullish momentum but may regain it in the near future. Let me remind you that my analysis is currently based on EUR/USD, which is showing signs of a possible resumption of bullish momentum. If the euro resumes its upward movement, the British pound may follow. Moreover, both central banks currently maintain a relatively restrictive monetary policy stance. Although the Bank of England is not planning a tightening in September, I cannot overlook the possibility that the British regulator's stance may become much more hawkish than before. The reason is straightforward. Oil prices are rising, threatening to reignite inflation. Most likely, on September 17, three of the nine members of the MPC will vote for a rate hike, while six will vote to keep rates unchanged. However, I allow for the possibility that the number of hawkish members could increase to four. In any case, the Bank of England cannot ignore the growing probability of accelerating inflation due to higher energy prices. Andrew Bailey said this week that the market is expecting excessively hawkish actions from the regulator, but at the same time did not specify which actions the market expects or which actions the Bank of England is prepared to take. In my view, the central bank's stance will become more restrictive, while the ECB will raise rates tomorrow. The euro and the pound have favorable conditions for a new upward move.
Over the past month, the dollar has faced numerous negative factors, including the US Treasury's decision to increase the volume of long-term bond buybacks, weak monthly Nonfarm Payrolls reports, a weak annual Nonfarm Payrolls report, slowing consumer price growth, slower GDP growth, and lower market expectations for Federal Reserve monetary-policy tightening. The dollar was supported only by the latest Nonfarm Payrolls report, for the first time in a long period, and the ISM Services PMI. In my view, the US dollar could have declined much more sharply than it did from June 25 to the present.
Do bears have prospects at this point? In my view, very few. As we have already established, the information backdrop does not support the US dollar. However, it should not be forgotten that not everything in the market depends solely on the information backdrop. From a long-term perspective, the market has been range-bound for about a year. We have seen three upward waves, and everything indicates that the bulls should continue their advance. However, traders should always have a contingency plan. At the very least, in the form of a Stop Loss.
Geopolitics no longer provides favorable support for the dollar. Negotiations between the United States and Iran have failed once again and are no longer taking place. From time to time, Iran and the United States exchange strikes, threats, and ultimatums, but this has no effect on resolving the conflict or ending the war. At present, no one can predict how much longer the conflict will continue. The dollar cannot rely on market support every time the two sides exchange strikes, which is happening with considerable regularity.
Chart analysis shows that the picture changed from bullish to bearish within just a few days after liquidity was taken from the May highs. The European currency may stop the pound's decline, but at present the bears have two imbalances from which short positions can be opened. Since the euro has a higher status than the pound within the euro-pound pair, I expect both bearish patterns to be invalidated and a new upward move in the European currency. However, in the near future, two events could turn the market against the euro and the pound: the Federal Reserve meeting and the US inflation report.
There was no economic information backdrop on Wednesday. Therefore, the low level of trader activity is easy to explain. Nevertheless, the bulls are still making attempts to move higher, and in my view, this is a positive sign. Even without economic support, the bulls see their targets and prospects and are sticking to their plan.
The overall information backdrop remains such that, in the long term, I cannot expect anything other than a decline in the US dollar. The war between Iran and the United States has not changed my long-term expectations. Geopolitics caused the market to focus on the dollar's safe-haven status for several months, but the conflict has already passed its most active phase. The prospects for FOMC monetary-policy tightening remain uncertain, while the market itself is constantly revising its expectations. Therefore, in my view, any rise in the dollar is temporary and driven by short-term factors. I see no reason for a large-scale bearish advance.
US and UK Economic Calendar:
On September 10, the economic calendar contains three entries, none of which are particularly important. The impact of the economic backdrop on market sentiment on Thursday will be limited.
GBP/USD Forecast and Trading Tips:
The long-term outlook for the pound remains bullish. After liquidity was taken from the two most recent swings and a series of buy signals was formed, the bulls may still continue their advance. Unfortunately, the bears have controlled the initiative in recent weeks, and all recent bullish patterns have been invalidated. The bears currently have only chart-based reasons to continue lower, while the euro may prevent the pound from declining. Liquidity taken from the May 1 swing allowed the decline to begin, and a sell signal was formed within the "inverted imbalance" 27. However, the pound cannot decline steadily if the euro is rising at the same time. Either the European patterns or the British patterns must be invalidated. I lean toward the British imbalances being invalidated. As of today, the information backdrop favors the euro and the pound.
*La presente analisi del mercato ha un carattere esclusivamente informativo e non rappresenta una guida per l`effettuazione di una transazione.
Le recensioni analitiche di InstaSpot ti renderanno pienamente consapevole delle tendenze del mercato! Essendo un cliente InstaSpot, ti viene fornito un gran numero di servizi gratuiti per il trading efficiente.
