August 25, 2022 18:45:44
The Sterling rose to a fresh daily high amid a weaker dollar and the expectations of aggressive monetary policy by the Bank of England. The current price action suggests the relief rally continues in the near future.
GBP gained more than 0.20% to 1.1865 Thursday but the downside risk remains intact below 1.1800. The U.S. dollar index slipped below 108.20 with more than 0.40% losses.
Investors looking for more clarity over central bank responses to the conflicting issue of managing recessionary risks and soaring inflation in upcoming week’s Jackson Hole symposium. The U.S. Federal Reserve Chair Jerome Powell is expected to take a softer approach to fight the hot inflation, and would further be joined by the officials from the European Central Bank and the Bank of England.
The Cable is likely to gain on the softer greenback. The move was sponsored by the weaker U.S. S&P Global’s data, where the service PMI reading came at 44.1 as compared to market expectations of 49.2. A reading below 50 indicates contraction.
However, the UK’s service PMI read 52.5 in August, much above the market expectations.
GBP/USD aims for 1.1900
On the 4-hour chart, the GBP/USD pair has made a bearish flag and pole formation. It is a bearish continuation pattern. However, the upper target of 1.1900 is still to be claimed by the bulls.
The moving average convergence divergence (MACD) trades below the midline with a bullish crossover. If the oscillator moves above the zero line, it would strengthen the upside momentum.
A close above 1.1850 would make bulls hopeful for a further recovery rally.
In contrast, a break below 1.1800 would continue with the prevailing downside momentum.
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