Current trend

The GBP/USD pair is approaching annual highs, trading at 1.3206. Among all the currencies of developed countries, the pound is the only one strengthening against the American dollar, having gained 3.9% this year.

Positive dynamics are developing against the recovery of key sectors of the economy. Thus, in September, the housing price index from the research company Rightmove Group Ltd., according to preliminary estimates, may grow from –1.5% to 0.8% MoM and from 0.8% to 1.2% YoY. On Wednesday, August data on consumer inflation dynamics is due: forecasts suggest that the consumer price index will remain at 2.2% YoY, while the core value may accelerate from 3.3% to 3.5%, signaling in favor of maintaining the vector of the regulator’s monetary policy. The retail price index in August may slow from 3.6% to 3.4%. The statistics will have a key impact on the decisions of the Bank of England, whose monetary policy meeting is due the next day. Experts are confident that officials will keep the interest rate around 5.00%. However, the comments of the financial authorities will allow investors to predict the further dynamics of the pound.

The American dollar is trading near annual lows at 100.30 in USDX. While last week most analysts believed that the US Fed’s borrowing costs would be adjusted by –25 basis points, today, according to the Chicago Mercantile Exchange (CME Group) FedWatch Instrument, the probability of it is only 31.0%, while adjustments by –50 basis points are 69.0%. Today at 15:15 (GMT 2), industrial production data is due. If it turns out to be stronger than expected, confidence in a sharp reduction in interest rates will be supported, putting pressure on the dollar.

Support and resistance

On the daily chart, the trading instrument is correcting, approaching the resistance line of the Expanding formation pattern with current boundaries of 1.3400–1.2850. Technical indicators strengthen the buy signal: fast EMAs on the Alligator indicator are moving away from the signal line, and the AO histogram is forming correction bars, rising in the buy zone.

Resistance levels: 1.3260, 1.3400.

Support levels: 1.3176, 1.3040.

Trading tips

Long positions may be opened after the price rises and consolidates above 1.3260, with the target at 1.3400. Stop loss is 1.3200. Implementation period: 7 days or more.

Short positions may be opened after the price falls and consolidates below 1.3176, with the target at 1.3040. Stop loss is 1.3230.