Published on Jul 18, 2023

GBP/USD Price Analysis: Bullish Bias Holds amid Intraday Gains as on 18-07-2023

GBP/USD Analysis

Key Points

Prior to the release of US Retail Sales data, GBP/USD is hovering around the 1.3070 level.
Market participants are expecting the Bank of England (BoE) to raise its interest rates by 50 basis points (bps) in August.
The US Dollar shows slight gains, influenced by weaker Chinese economic growth figures and a positive US Empire manufacturing survey.

Today's Scenario: -

During the early Asian session on Tuesday, the GBP/USD pair remains within a narrow range as market sentiment turns cautious ahead of the upcoming releases of US Retail Sales and the UK Consumer Price Index (CPI). Currently, the pair is trading around 1.3072, showing a slight decline of 0.01% for the day.

On Wednesday, the UK will release the Consumer Price Index (CPI) for June. It is expected that the YoY CPI will be 8.2%, lower than the 8.7% recorded in May, while the core CPI is anticipated to remain unchanged at 7.1% compared to May. Market participants have high expectations that the Bank of England (BoE) will raise interest rates by 50 basis points (bps) in August. However, concerns arise about the potential negative impact of the BoE's aggressive tightening policy on Britain's economic outlook as it aims to control inflation and meet its target.

Conversely, the US Dollar Index, which measures the Greenback against a basket of six major currencies, has seen modest gains. This can be attributed to weaker Chinese Gross Domestic Product (GDP) data for the second quarter and the positive US Empire State Manufacturing Index for July. The Federal Reserve Bank of New York reported on Monday that the NY Empire State Manufacturing Index declined to 1.1 from -5.5, surpassing expectations of -3.5.

Looking ahead, market participants will closely monitor the US Retail Sales data, which is expected to show a 0.5% increase compared to the previous reading of 0.3%. However, the primary focus will be on Wednesday's release of the UK Consumer Price Index (CPI). This figure will significantly impact the GBP/USD pair and help determine its future direction.

Diagram of GBP/USD: -

Economic Events: -

Buy Scenario: -

On the upside, bullish traders may wait for sustained strength above the 1.3100 mark before considering significant intraday upward moves. If momentum builds, the GBP/USD pair could advance towards the 1.3140 region, which represents the multi-month peak. Further buying pressure may lead to a move towards reclaiming the 1.3200 level. If the upward momentum persists, the pair could target the intermediate hurdle between 1.3250 and 1.3260, and potentially extend gains towards the 1.3300 level. Till we do not advise to buy GBP/USD.

Sell Scenario: -

the downside for the GBP/USD pair is supported by expectations that the Bank of England (BoE) will pursue a more aggressive approach in tightening its monetary policy to address persistent inflationary pressures. Therefore, market focus remains on the upcoming release of the UK consumer inflation figures, scheduled for Wednesday, as they are expected to impact the British Pound (GBP) and provide further direction for the pair. In the short term, traders will also closely monitor the US monthly Retail Sales data for potential trading opportunities on Tuesday.

From a technical standpoint, the breakout above a resistance level formed by the upper boundary of a nearly one-month ascending channel last week has been considered a bullish trigger. However, the Relative Strength Index (RSI) on the daily chart indicates slightly overbought conditions, which may limit further gains for the GBP/USD pair. Nevertheless, the fundamental backdrop appears to favor bullish traders, suggesting that any significant pullback could be seen as a buying opportunity.

Immediate support for the pair is found around the 1.3050 area, followed by the psychological level of 1.3000. A decisive break below 1.3000 could trigger technical selling, potentially leading to a decline toward the next relevant support near the 1.2930 horizontal zone. However, any subsequent decline is likely to attract buyers near the 1.2900 level, limiting further losses. The 1.2850 horizontal resistance breakpoint is expected to act as a strong support level and a key pivot point for short-term traders. Till then we do not advise selling GBP/USD.