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The technical side turns short, is the GBP/USD facing in-depth adjustments?
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Hello everyone, today XM Foreign Exchange will bring you "[XM Official Website]: The technology has turned short, is the GBP/USD facing in-depth adjustments?". Hope it will be helpful to you! The original content is as follows:
On Friday (July 25), the pound/dollar continued its weak performance, and the US market fluctuated around 1.3450 before the market opened. The exchange rate is dragged down by multiple fundamental factors and shows a clear adjustment trend. Changes in market expectations for the Federal Reserve's monetary policy and weak performance in UK economic data have jointly driven the downward trend in exchange rates.
Fundamentals
The performance of UK economic data is lower than expected and has become the main reason for the pressure on exchange rates. Retail sales data for June released by the Office of Statistics showed that it grew by 0.9% month-on-month, lower than market expectations by 1.2%, and the previous value was a 2.7% decline. It was up 1.7% year-on-year, slightly lower than expected 1.8%. Sales in other non-food stores saw a significant decline in sales, despite strong demand for automobile fuel and increased department store sales revenue.
The slowdown in private sector activity in the UK further increased downward pressure on the pound. The initial value of the UK S&P Global Purchasing Managers Index for July released on Thursday showed that the xm-forex.comprehensive PMI was 51.0, lower than the expected 51.8 and the previous 52.0, reflecting the impact of global situation uncertainty and moderate recruitment trends on business activities.
In terms of the US dollar, the market's expectations for the United States to reach a number of agreements with major international partners provide support for the US dollar. According to the Financial Times, the United States and the European Union are expected to reach a tariff agreement soon, which is a positive for the US dollar and US assets. In addition, Trump also announced this week that he had reached an agreement with Japan to cut benchmark and automobile tariff rates to 15%, further easing market concerns about the impact of tariff policies on the US economy.
The current focus of the market turns to the U.S. personal consumption spending in June, which will be announced next weekPrice index data, and Wednesday's Federal Reserve monetary policy meeting. According to the Federal Observation Tool of CME, the probability of the Federal Reserve maintaining interest rates unchanged in the range of 4.25%-4.50%.
Technical aspect:
From the analysis of technical charts, the pound/dollar show a clear adjustment pattern. Price trends show that after experiencing the previous rising market, the exchange rate is currently in a technical pullback stage.
In terms of Bollinger Band indicators, the exchange rate is currently operating in the middle and lower rail areas of the Bollinger Band, and the Bollinger Band is showing a narrowing trend overall. The current exchange rate is below the middle track of 1.3513, indicating that the downward pressure is more obvious in the short term. The upper Bollinger track is at 1.3588 and the lower track is at 1.3438. The price space is relatively limited, which implies that the exchange rate may enter the consolidation stage.
MACD indicators show typical top divergence signals. The MACD fast line is located at -0.0027 and the slow line is 0.0015, forming a dead fork pattern. More importantly, the MACD bar chart has turned into a negative area, and the length of the bar chart has gradually expanded, indicating that the lower action energy is increasing. This technical signal usually indicates the possibility of a trend reversal.
The RSI currently reads 35.9832, and has entered the edge of oversold areas. The rapid decline in RSI indicators reflects the concentrated release of recent selling pressure. Analysts believe that judging from the RSI trend, there is still room for further decline in the indicators, but the close to oversold level also suggests that the possibility of a technical rebound is increasing.
Analysis of key support resistance levels shows that exchange rates face multiple technical tests. Looking upward, the 1.3500 integer mark constitutes a key resistance in the near future, and the stronger resistance is located near 1.3588, corresponding to the Bollinger upper rail position. Looking down, 1.3438 becomes an important support, which corresponds to the Bollinger lower track and the previous low. If this support is lost, the next key support is located near 1.3364.
Prevention of Market Sentiment
Current market sentiment shows obvious risk aversion characteristics. As a risk-sensitive currency, the British pound is facing greater pressure against the backdrop of increased global economic uncertainty. The market's expectations of the Bank of England's August interest rate resolution have increased, further increasing the volatility of the pound.
The relative strength of the US dollar index reflects the market's recognition of the resilience of the US economy. Although inflation concerns remain, the market generally believes that the Fed will maintain a relatively stable stance on monetary policy. This expectation difference allows the US dollar to maintain its dominance among major currency pairs.
Traders' attention to geopolitical risks has increased. Although the news that the UK and India signed a freedom agreement is positive for the pound in the long term, it is difficult to offset the negative impact of weak economic data in the short term.
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