After the release of fresh inflation data in the UK on Wednesday (at 07:00 GMT), indicating its slowdown, the pound sharply weakened as it lowered expectations for further interest rate hikes by the Bank of England.
Following today's new attempt to break the key resistance level at 1.2735 (200 EMA on the weekly chart), GBP/USD retreated from it again after the publication of British CPI and fell to the intraday low of 1.2645. However, as of writing, the price has not dropped below this level, and GBP/USD has found support at the important short-term level of 1.2657 (200 EMA on the 1-hour chart).
Given the still existing overall weakness of the dollar, it would be appropriate to expect a rebound from this support level and a resumption of the pair's growth if today's expected macro data from the U.S. (at 15:00 GMT) fail to surprise market participants and dollar buyers, lacking impressive figures.
In this case, a new retest of key resistance levels at 1.2735 (200 EMA on the weekly chart) and 1.2770 (50 EMA on the monthly chart) is possible. Then, by the end of the year, GBP/USD is likely to remain trading near these levels.
If the beginning of the new year 2024 turns out to be unsuccessful for the dollar, and it continues to weaken, then breaking through resistance levels at 1.2735, 1.2770, 1.2800 will lead GBP/USD into the zone of a long-term bullish market. In this case, the growth targets will be local resistance levels 1.3000, 1.3140.
In an alternative scenario, if the price still breaks the support level of 1.2657, and after breaking through the important long-term support level of 1.2610 (144 EMA on the weekly chart), GBP/USD will head deeper into the downward channel on the weekly chart towards the key medium-term support level of 1.2440 (200 EMA on the daily chart).
Its breakdown, in turn, will signify a transition to the zone of a medium-term bearish market and a resumption of the long-term downward trend.
At least, the first signal for the development of this scenario – breaking the "round" support level of 1.2700, has already been received.
Support levels: 1.2657, 1.2610, 1.2600, 1.2540, 1.2500, 1.2455, 1.2440, 1.2400
Resistance levels: 1.2735, 1.2770, 1.2800, 1.2900, 1.2995, 1.3100, 1.3140, 1.3200
Trading Scenarios
Main Scenario: Buy Stop 1.2685. Stop-Loss 1.2625. Targets 1.2700, 1.2735, 1.2770, 1.2800, 1.2900, 1.2995, 1.3100, 1.3140, 1.3200
Alternative Scenario: Sell Stop 1.2625. Stop-Loss 1.2685. Targets 1.2610, 1.2600, 1.2540, 1.2500, 1.2455, 1.2440, 1.2400, 1.2300, 1.2200, 1.2120, 1.2100, 1.2090, 1.2040, 1.2000
"Targets" correspond to support/resistance levels. This also does not mean that they will necessarily be reached, but can serve as a guide when planning and placing your trading positions.