The GBPUSD pair is close to an important support level as the market waits for key financial data and announcements. The US dollar has strengthened recently, although no clear reason for this increase has been found. The GBPUSD is currently trading within a narrow range, looking for direction. In the UK, data has been mixed: the Consumer Price Index (CPI) was higher than expected, while employment figures were weaker. There is an 87% chance of a 25 basis point cut in interest rates at the upcoming August meeting, with two rate cuts expected by the end of the year.

Technical Analysis Overview

On the daily chart, the GBPUSD is nearing support at around 1.3368, which is part of a significant head and shoulders pattern. Buyers might enter around this support level, while sellers may look for a drop toward 1.3140. The 4-hour chart doesn’t provide much information since the support hasn’t been reached yet. However, the 1-hour chart shows a slight downtrend, indicating bearish momentum. Sellers may find better opportunities around the trendline and at the 1.3452 level, while buyers will be looking for a rise to 1.36. Key upcoming events to watch for include US Job Openings and Consumer Confidence data, followed by the US Q2 GDP report, the FOMC rate decision, the PCE price index, and the NFP report in the coming days. This week brings significant risk with the Federal Reserve’s decision and the jobs report on the horizon. This situation suggests that buying options could be a smart way to manage risk during the expected volatility. Historically, the GBPUSD has seen sharp moves of over 100 pips within 24 hours of such announcements.

Market Strategies And Recommendations

For those betting on a stronger dollar, a break below the 1.3368 support level is crucial. With the latest U.S. Core PCE inflation staying steady at 2.8% and the last jobs report adding a solid 272,000 jobs, any hawkish surprise could trigger this movement. If the break happens, traders may consider buying put options or selling futures with a target near 1.3140. On the other hand, buyers might defend this key level due to a crowded short dollar trade. Even though UK inflation has recently met the central bank’s 2% target, strong wage growth creates challenges for rate cuts, potentially supporting the pound. Traders expecting a bounce could think about buying call options with strike prices above 1.3400, aiming for a move towards the 1.36 mark. With uncertainty before these upcoming events, a long straddle or strangle option strategy could be beneficial. This strategy involves buying both a call and a put option, allowing profit from a major price move in either direction. This approach bets that new data will push the market out of its current range. For effective risk management, it’s important to use the identified technical levels. For bearish positions, consider placing a stop-loss just above the minor downward trendline near the 1.3452 level. For bullish positions, the risk is defined clearly just below the major support level, preventing significant losses if a drop occurs. Create your live VT Markets account and start trading now.

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