The pound is technically bullish and is expected to challenge the new high of 1.2850 this year! What data should we pay attention to in the near future?
Huitong Finance APP News – According to a new analysis by retail trading agency City Index,GBP(1.2768, 0.0065, 0.51%) vs USDStill subject to a bullish technical outlook, this analysis provides some context for the recent pullback and consolidation.
Institutions say GBP/USD is technically bullish
The technical outlook for GBP/USD “remains bullish” given higher highs and higher lows, City Index analyst Fawad Razaqzada wrote in a research note.
Razaqzada said: “The area around 1.2700 is the support level that was broken last week. We are now back above this area. As long as the bulls can hold on, we may see some follow-through buying, pushing the exchange rate above 1.2850 in the year. new highs.”
GBP/USD hit 1.2850 on June 16, its highest level since April 2022, but retreated over the next few days as the dollar staged a broader rally that coincided with the Fed realizing further rate hikes were on the way In response to better than expected economic data. However, the pullback was relatively small, allowing GBP/USD to stabilize around 1.27 again.
But according to Razaqzada, holding the 1.27 level will be an important condition for sustained bullishness. “But the bears are looking for a close below 1.27, which would push rates below 1.2600 support,” he said.
British two-year government bond yields are proving attractive for yield-hungry international investors and are still near their highest level since 2008 as markets begin to price in further rate hikes from the Bank of England.
Goldman Sachs FX analyst Michael Cahill said: “We think sterling should do better as real rates need to move higher.”
Recent data affecting GBP/USD
Much of the recent GBP/USD movement depends on the US side, as the first major data for the pound this month won’t be released until July 11, with UK labor market figures for May. In addition, at 22:00 on July 6, Beijing time, the United States will announce the June ISM non-manufacturing PMI, which is another important recent data that affects the trend of the pound against the dollar .
Razaqzada said: “While U.S. manufacturing activity has been weakening, the services PMI has been above the 50.0 expansion level for the past three months – albeit only slightly above 50.0. If we start to see the services sector at a high rate If the downturn revives, then that should keep the FOMC dovish quiet for at least a few more months. However, if the services PMI also turns lower, then that would set off recession alarm bells and could weigh on the dollar.”
At 20:30 on July 7, Beijing time, the United States will announce the non-agricultural report for July. The non-farm payrolls report is expected to be strong again given that survey data last week were mostly positive, suggesting the economy continues to beat expectations.
Razaqzada said: “The U.S. job market is particularly strong, with non-farm payrolls beating expectations for 14 consecutive months! Will this trend continue? If so, it will mean that interest rates may remain higher for a longer period of time levels. That could benefit the dollar in the short term, even though a prolonged period of high interest rates could end up hurting the economy at a later point in time.”