The GBP/USD pair is up 0.85% as dollar weakness continued into the New York session. The advance on the cable is being driven by expectations of tighter monetary policy measures by the Bank of England when it announces its new interest rates.
Not even the release of a manufacturing PMI report that showed a less-than-expected contraction in business activity in the US manufacturing report was enough to bring some reprieve for the greenback.
The US Dollar Index dropped for a second consecutive week at the end of July, posting the first straight weekly losses since mid-May. The failure of the Fed to hit a 100 bps rate hike was somewhat of a disappointment to market participants, and this was shown by the lackluster performance of the greenback and the pick-up of risky currencies and cryptos.
As a result, traders are now betting that the Fed may take a softer stance towards any further rate hikes. The GBP/USD is up 0.87% as of writing and looks good to finish the session in green territory for the third trading day in four. The BoE interest rate decision is the next big fundamental trigger for the pair.
The pair has violated the 1.22755 resistance mark, and a breakout clears the pathway to the 1.23340 resistance barrier (27 June high). Above this level, the breakout move from the large falling wedge is expected to attain completion at the 1.24167 resistance barrier (28 April low and 16 June high).
On the other hand, failure to complete the breakout from 1.22755 allows for a retracement that targets 1.21673 initially (4 July high and 1 August low). Below this level, additional downside targets are seen at 1.21000 (30 June and 28 July lows) and at 1.19991, where previous lows of 15 June and 1 July 2022 are found. Finally, 1.20907 may also form a pitstop for the bears, being the 25 July 2022 high now acting in role reversal.
This post was last modified on Aug 01, 2022, 17:07 BST 17:07