GBPUSD has been on an FX setup downtrend ever since the BOE showed a bit of hesitation when it comes to tightening monetary policy by the end of the year. Price has broken below a support area around the 1.6850 minor psychological level and has traded near the 1.6750 handle.
From there, price bounced up for a retracement, possibly until the broken FX setup support zone. This lines up with the 50% Fibonacci level, but it looks like the 38.2% level is holding for now. Stochastic is already moving down towards the oversold area, indicating that selling pressure might fade soon.
A higher pullback could last until the 50% Fibonacci level and the resulting FX setup selloff could take the pair back to its previous lows at 1.6750 or lower. Take note that the UK claimant count change and BOE inflation report are up for release today and this might determine the longer-term direction of the pound.
GBPUSD FX Setup Forecast
The UK claimant count change is projected to show a 27.4K drop in joblessness for the month of July but, given the weak trends in labor market data recently, the actual figure might show weaker than expected results. Despite that, analysts expect the jobless rate to improve from 6.5% to 6.4% in July. If the actual results fail to meet expectations though, GBPUSD could be in for more short FX setup trades.
Potential downgrades from the BOE could also weigh on longer-term pound price action, as growth and inflation forecasts could be revised lower. After all, manufacturing reports have reflected a slowdown in the past months.
On the other hand, stronger than expected data from the UK could lead to a climb back to the 1.6800 levels, as upbeat figures could renew speculations of a rate hike from the UK central bank before the end of the year and long GBPUSD FX setup positioning.
To contact the reporter of the story: Samuel Rae at email@example.com