Market experts believe that the current week will be rich in events for the British currency. They also point out that bulls have resumed momentum and it might be a good entry point to open long trades.
Last week, the US dollar managed to add gains amid positive fundamental news. So, the pound sterling rose slightly over the week. Besides, there were no drivers for its growth although its volatility remained at an appropriate level. According to analysts, over the past two weeks, there has been an accumulation of long positions on GBP. Experts are sure that in the near future, the pound sterling will become cheaper. Traders are sure to take advantage of it.
The current week may be more favorable for the pound sterling. The UK will unveil its inflation report on Wednesday, August 18. According to preliminary calculations, in July 2021, the annual consumer price index is projected to slightly decrease compared to June. It is highly likely to amount to 2.3%. If so, this will be the first decline in the GBP since March 2021. At the same time, experts envisage a decrease in the monthly indicator to 0.3% compared to the current 0.5%. The core consumer price index in the UK is expected to total 2.2% year on year.
Experts assume that the upcoming inflation report will have almost no impact on the Bank of England's decision on monetary policy. Earlier, the regulator stated that in the coming months it expected inflation to exceed the target of 2% due to the negative consequences of the coronavirus crisis.
Another key factor that affects the global foreign exchange market is a strong influx of buyers of the pound sterling and the US dollar. In this situation, many experts recommend buying GBP if it breaks the support level of 1.3890. Notably, there has been no clear-cut trend in the GBP/USD pair for a long time. Two trends are simultaneously recorded in tandem: at the level of 1.3878, there is a noticeable resistance level for the pound sterling while the mirror level of 1.3846 acting as a support.
On Monday morning, August 16, the GBP/USD pair was trading near 1.3868. However, the trend may change at any time. The MACD histogram is in the negative zone, gradually rising and giving a signal to buy the British currency.
Bulls are likely to take the upper hand if the pair breaks the resistance level of 1.3878. If so, it may well reach 1,3930. Bears will take control if the pair breaks the mirror level of 1.3846. If this is the case, the quote will decrease to the level of 1.3799 and below.
According to analysts, the resistance level of 1.4000 may be a potential danger for buyers of the pound sterling. If it fails to break through this level and the support levels are weak, then after the collapse to 1.3570, GBP may face a strong sell-off. If this scenario comes true, the pound sterling will noticeably sink, which will have an extremely negative impact on the overall state of the economy. However, now there is an alternative option, which gives hope for a favorable development of events.