The GBPUSD pair increased today after stabilizing earlier this week within a range of 1.3360 to 1.3378. Buying interest grew when the pair rose above its 100-hour moving average at 1.3416, gaining strength in the early U.S. session. This rise pushed the pair into a higher range between 1.3448 and 1.3475, which aligns with the 50% midpoint of the range since May’s low at 1.3464. The day’s peak was 1.34745, close to the top of this range, but it couldn’t break through. As a result, the pair moved lower and is now trading below the swing area low of 1.3448.

Key Support And Resistance Levels

Earlier, buyers regained the 100-hour moving average and briefly rose above the 50% midpoint but couldn’t hold that ground or reach the 200-hour moving average. The failed attempt above 1.3464 acts as a risk point for sellers and a target for buyers aiming to regain control. On the downside, the key support is at the 100-hour moving average of 1.3416. From the current level around 1.3435, a move back to this average is possible. If it breaks below, sellers may gain momentum, potentially leading back to the support zone between 1.3378 and 1.3360. We believe the recent failure at the 1.3475 resistance level presents a good opportunity for derivative traders. The inability to maintain gains above the key midpoint suggests weakness, making strategies that take advantage of a decline or consolidation appealing. Thus, we are considering buying put options or setting up bear put spreads to profit from a potential move back toward lower support levels. This cautious outlook is supported by recent economic data, as UK inflation remains high. The latest figures from the Office for National Statistics show the Consumer Prices Index (CPI) at 3.9%. Although this is down, it is still nearly double the Bank of England’s target, complicating future rate policies. This uncertainty from Governor Bailey’s team is likely to limit the pound’s strength in the near term.

Economic Outlook And Trading Strategy

In contrast, the U.S. economy shows more strength, with the latest Non-Farm Payrolls report showing an impressive addition of 216,000 jobs, far surpassing forecasts. This robust labor market gives the Federal Reserve more room to maintain a hawkish approach to ensure inflation is managed. Such a policy divergence typically strengthens the U.S. dollar, putting further downward pressure on this currency pair. For a straightforward bearish play, buying put options with a strike price just below the critical 100-hour moving average at 1.3416 seems wise. A strong break below this support would indicate a change in momentum, likely accelerating a decline toward the 1.3360 swing area. Historical patterns suggest that rejection at a major 50% retracement level often leads to a retest of the previous low. However, if the market reverses and buyers reclaim the 1.3475 level strongly, we may need to adjust quickly. A sustained movement above this zone would invalidate our bearish outlook and could be targeted by purchasing call options. This would indicate that initial selling pressure has been absorbed, signaling a new upward movement. Create your live VT Markets account and start trading now.

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