GBPUSD Forecast: Bulls need to claim 1.2200 to stay in control
(Eren Sengezer – FXStreet)
– GBP/USD has lost its traction in the European session on Friday.
– The pair needs to stabilize above 1.2200 to stay bullish.
– The dollar could stage a rebound on hot PCE inflation data.
GBP/USD has reversed its direction and dropped below 1.2200 after having touched its highest level in a month at 1.2245 earlier in the day. The risk-positive market environment could limit the pair’s downside in the near term but investors could refrain from betting on further pound strength unless the pair reclaims 1.2200.
The heavy selling pressure surrounding the greenback fueled GBP/USD’s rally this week. FOMC Chairman Jerome Powell’s cautious remarks on the rate outlook and the disappointing second-quarter growth data from the US caused market participants to scale down hawkish Fed bets. According to the CME Group’s FedWatch Tool, there is now a nearly 80% probability of the US central bank raising the policy rate by 50 basis points in September. Reflecting the broad-based dollar weakness, the US Dollar Index fell to a fresh three-week low below 106.00 early Friday.
In the second half of the day, the US Bureau of Economic Analysis will release the Personal Consumption Expenditures (PCE) Price Index data. On a yearly basis, the PCE inflation is expected to rise to 6.7% in July from 6.3% in June. A stronger-than-forecast print could weigh on market mood and help the dollar stage a recovery. On the other hand, a soft inflation print should cause investors to stay away from the greenback.
The US economic docket will also feature the Employment Cost Index for the second quarter, which Powell mentioned as one of the data they watch when assessing wage inflation. The market consensus points to a decline to 1.2% from 1.4% in the first quarter.
It’s also worth noting that the market volatility could ramp up toward the end of the European session. GBP/USD is up nearly 150 pips this week and investors could book their profits on the last trading day of July.
GBPUSD Technical Analysis
Despite the latest retreat, the bullish bias stays intact in the short term with GBP/USD holding comfortably above the ascending trend line and the 200-period SMA on the four-hour chart. Additionally, the Relative Strength Index (RSI) indicator on the same chart stays near 60.
Nevertheless, 1.2200 (psychological level) aligns as key resistance and the pair needs to flip that level into support to extend its rally. In that scenario, 1.2250 (static level) could be seen as the next hurdle before GBP/USD could target 1.2300 (psychological level) and 1.2320 (the beginning point of the latest downtrend).
On the downside, initial support forms at 1.2125 (Fibonacci 61.8% retracement of the latest downtrend) ahead of 1.2100 (psychological level) and 1.2070 (200-period SMA).
Silver set to surge? [Video]
(Giles Coghlan LLB, Lth, MA – HYCM)
The gold/silver ratio points to a high value in silver
The gold/silver ratio is a helpful tool for assessing when it may be better to be in gold or silver positions. Over the last few months, the ratio has been steadily rising as it makes its way up to 100. If the gold/silver ratio does hit 100 then traders should be aware of the silver seasonal pattern that is in place which could potentially support any silver longs.
Over the last 10 years, silver has had an annualised return of 43.29%. Yes, it has had the same up years as down years between July 31 and August 31, but the average return has still been a strong 3.11%. So, if the fundamentals are in place and the gold/silver ratio hits 100 then silver could be a great commodity to buy as we head into the end of the year.
Major trade risks: If the USD and Real yields keep moving higher then silver prices can still remain pressured.