The Pound Sterling is still significantly undervalued compared to the US Dollar, and there are no signs of improvement. However, it’s unlikely that the Pound will drop to 1.3300. Current analysis indicates continued weakness in the GBP, with the next target still at 1.3300. On Friday, the GBP fell sharply, dropping below both 1.3400 and 1.3365. It remains in an oversold condition with no clear signs of recovery. Resistance levels are at 1.3390 and 1.3420. There’s also support at 1.3335, making it unlikely for the GBP to reach 1.3300 right now.

Weekly Overview and Predictions

This week, the GBP has fallen more than expected, breaking the crucial support level of 1.3365 and hitting a low of 1.3352. Analysts remain pessimistic about the GBP unless it exceeds the resistance at 1.3465. Market conditions can be risky and unpredictable. It’s essential to do thorough research before making any financial decisions since all investments can result in loss. With the Pound Sterling so undervalued, it struggles to find stability. Current weaknesses indicate a focus on the 1.3300 level, but immediate support at 1.3335 could briefly slow the decline. Traders in derivatives should prepare for continued downward pressure over the next few weeks.

Economic Data and Strategy

This negative view is backed by economic data. Recent reports show UK inflation dropping to 1.8% year-over-year, raising expectations for a bank rate cut in the UK. Meanwhile, the US Federal Reserve’s strong stance is supported by a solid job market. This difference in policy favors the dollar and increases pressure on the pound. For those expecting the GBP to keep falling, buying put options with a strike price near 1.3300 for expiration in late August or September could be a wise strategy. This allows traders to benefit from a drop below that level while limiting potential losses to the premium paid. This is useful since the “oversold” situation may lead to unpredictable brief recoveries. Alternatively, for a more cautious approach that could profit from steady movement or a gradual decline, consider selling call options. A bear call spread with the short strike above the crucial resistance level of 1.3465 could generate income from the premium collected. This position would profit as long as the currency pair doesn’t have a significant rally above that point. The current sharp decline resembles the market volatility from late 2022, although driven by different economic factors now. Historically, such swift moves are often followed by stabilization before the next major shift. This pattern indicates that although the overall trend is downward, reaching 1.3300 may not be a straight path. It’s essential to monitor any position closely, as a move above the key resistance at 1.3465 would change our negative outlook. Such a break would prompt a reevaluation of our bearish strategies. Managing risk is crucial in these uncertain market conditions. Create your live VT Markets account and start trading now.

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