The pound against the dollar is approaching the important resistance level of 1.3200. It has repeatedly tried to approach this target throughout August, but the GBP/USD pair returned home each time. As soon as the buyers break through the resistance level of 1.3150, the sellers take their initiative, thereby expressing doubts that the pair will go higher - to the area of the 32nd figure. Indeed, the GBP/USD pair tested this price area only twice this year – at the very beginning of the year and at the start of the coronavirus crisis, when the dollar was actively losing its positions (as we remember, then the situation became mirror-like). Now, the pound is attacking an impassable price barrier again. The problem is that traders rush to close longs as soon as the price approaches the boundaries of the 32nd price level. A domino effect occurs and the pair pulls back again and again. The Australian dollar was in a similar situation with the US currency. It attacked the level of 0.7000 for more than a month: as soon as the Australian dollar approached the key level, market participants entered the sale and thereby putting an end to the bullish ambitions of the currency.
A sharp weakening of the US currency supported the buyers of the AUD/USD pair: the pair impulsively broke through the resistance level and consolidated above the level of 0.7050. In this case, selling looked already risky, so the pair slowly but surely continued its upward movement.
The pound needs a similar scenario, however, the whole problem is that the dollar is now gradually weakening, being under the burden of negative fundamental factors. Buyers need a strong informational reason to break through the level of 1.3200, and most importantly, to consolidate above this target. Ideally, such a news feed should be associated with Brexit, or more precisely, with the prospects for a trade deal between London and Brussels. But there is still silence on this "front", so GBP/USD traders have to focus either on political events in the United States or on macroeconomic reports. Given this disposition, tomorrow's release of UK inflation growth data could play a key role for the pound - at least in the medium term.
Let me remind you that market participants calmly took the news that the British economy collapsed in the second quarter to record lows. After similar releases in the US and the EU, this dynamic was predictable. But more prompt macroeconomic reports may cause increased volatility for the GBP/USD pair. Tomorrow's release also belongs to such publications, we will find out the July inflation dynamics. It should be noted that preliminary forecasts are negative. According to experts, the general consumer price index on a monthly basis will decline into the "negative zone" again, reaching -0.1% (it was at the level of 0.1% in June, at zero in May, and below zero in April). In annual terms, the general CPI should also show a slight slowdown - to 0.5% (there was an increase to 0.6% in June).
The July data on the general forecasts should be slightly worse than the June data. If the release comes out at the level of expectations, the pound is unlikely to pay attention to it. But if the indicators find themselves in the "positive zone" (especially with regard to core inflation), then this may serve as a reason for an impulsive rise in prices, followed by consolidation within the 32nd figure.
In the meantime, the pound is following the dollar, which continues to decline throughout the market. The dollar index has already reached the middle of the 92nd figure, thus updating its two-year lows. Negative factors in the form of an aggravation of the US-China conflict and political battles in the US Congress continue to put pressure on the dollar. The Empire Manufacturing index also worsened the situation which declined to 3.7 points, contrary to forecasts of growth to 17 points.
From a technical point of view, the priority also belongs to the growth of GBP/USD, and on many "higher" time frames - H4, D1 and W1. So, on the daily chart, the price is between the middle and upper lines of the Bollinger Bands indicator, and the Ichimoku indicator has formed a bullish "Parade of Lines" signal. The weekly chart also shows the priority of the upper scenario: the pair is on the upper line of the Bollinger Bands indicator and the price is above the Kumo cloud. The first (and so far the main) target for the upward movement is 1.3205, which is the annual maximum that was reached in January this year.