GBP – Pound sterling tests technical top, eyes on weekly CPI data

GBP/USD traded in a narrow sideways range on Monday, with investors focused on US President Trump's upcoming meetings with Ukrainian and European leaders, as well as UK consumer inflation data due on Wednesday. GBP/USD has risen by approximately 2% so far in August, buoyed by upbeat economic data and the Bank of England's hawkish rate cut earlier this month. A key focus this week will be the Kansas City Fed's Jackson Hole Symposium from August 21-23, with Fed Chairman Powell set to deliver a speech on the economic outlook and the central bank's policy framework on Friday. Money markets are currently pricing in an 85% probability of a 25 basis point Fed rate cut next month.

GBP/USD has been rising for the past two weeks, but appeared to encounter resistance around 1.36 last week, having previously encountered resistance at this level on July 23 and 24. Furthermore, the RSI and Stochastics are showing signs of retreating from overbought territory. If GBP fails to break through 1.36 in the short term, caution is advised against brewing pullback pressure. Support will initially revert to 1.35 and the 25-day moving average at 1.3420, with the next levels expected to be 1.3280 and even the May low of 1.3137. Resistance will continue to focus on 1.36, with significant resistance expected at 1.3680 and 1.3750, followed by 1.38.

Forecast range:
Resistance: 1.3590 – 1.3750 – 1.3800 – 1.4000
Support: 1.3480 – 1.3340 – 1.3280 – 1.3137

Focus:
Wednesday
UK July CPI (2:00 PM)

Thursday
UK July Public Sector Net Borrowing and Spending Shortfall (2:00 PM)

Friday
UK August GfK Consumer Confidence Index (07:01 AM)
UK July Retail Sales (2:00 PM)

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