Cable bounced vigorously from 28 July’s lows around $1.327 as the Fed held rates as expected, American growth in Q2 seemed weaker and the Bank of England’s Monetary Policy Committee appeared somewhat more hawkish. The MPC voted 6-3 to hold at 3.75% on 30 July against the consensus of 7-2, highlighting again the risk of inflation rising later in the year. Andy Burnham’s new government is still mostly enjoying its honeymoon in the press so political issues in Britain might remain less important in August as is seasonally typical.
The price showed a fairly strong bounce on 29 July around the Fed’s meeting and is now testing the 20 SMA. However, if it breaks through, both the 100 and 200 SMAs are potentially strong dynamic resistances. The slow stochastic is in the process of an upward crossover in oversold, which might in itself give more confidence in further gains but for the possibly important areas above. Neither ATR nor volume show significant changes: it would be very unusual for volume to increase consistently for a major forex pair at the end of July.
Although the downside seems questionable fundamentally now, ongoing strikes in the Gulf or a possible escalation might drive demand for the dollar as a haven. The recent low around $1.327 could cap losses and the price might then settle into a range unless there’s a significant surprise from 7 August’s NFP.
This is my personal opinion, not the opinion of Exness. This is not a recommendation to trade.