The Pound Sterling didn’t change much against the US Dollar on Wednesday. It saw little movement overnight due to a lack of significant data releases. The key event to watch for is the trade and industrial production figures coming out on Friday, which may impact discussions at the Bank of England (BoE) ahead of their August meeting. Current indicators show that GBP/USD momentum has returned to a neutral state after a recent dip. The Relative Strength Index (RSI) is currently at 50. The market is still bullish as long as it stays above 1.35, supported by the 50-day moving average at 1.3486. Short-term support is just below 1.3550, while resistance is seen above 1.3650.

Market Sentiment

Markets are currently stable. After a quiet Tuesday and little movement overnight, the Pound is lacking direction. With no strong data or surprise announcements, traders are consolidating positions, keeping GBP/USD in a narrow range. They are hesitant to commit too much ahead of important data that could shift sentiment. Friday’s industrial output and trade balance data may provide insights into future policy direction. While these figures aren’t major news, their timing—just weeks before the BoE’s next decision—makes them significant. If the numbers are better than expected, it could impact views on a less dovish stance for August. Conversely, disappointing figures might prompt expectations for delayed tightening. On the technical side, short-term momentum seems to be pausing. The RSI at 50 shows no extremes—neither overbought nor oversold—which reflects what we are seeing in price movement: consolidation rather than a trend reversal. The pair is still staying above 1.35, acting as a psychological support. The price is hovering around the 50-day average, indicating some interest from dip buyers, though overall confidence appears limited. Support just below 1.3550 aligns with past lows where demand has emerged repeatedly. The key level to watch is 1.3486, the 50-day moving average. Falling below this could lead to a more aggressive sell-off of long positions, as stop-loss orders are typically placed just beneath major moving averages. On the resistance side, 1.3650 is the upper limit of the recent range. A strong move above this level would likely require a significant catalyst or a broader dollar decline.

Current Trading Strategy

Currently, we are neutral but watchful. Options positioning has been ordinary, and implied volatility remains low, indicating limited expectations for sharp price movements soon. However, this also means that markets could be surprised if Friday’s data deviates from expectations. With important policy guidance approaching and the economic environment in play, there’s heightened sensitivity to releases. In these conditions, focusing on ranges and respecting technical boundaries might be the better approach, rather than chasing breakouts. Trend-followers need to remain patient. Short-term derivatives appear reasonably priced, particularly for those involved in intraday trades. It’s advisable to monitor realized volatility, as even small changes in rate expectations can influence option premiums, especially during quieter summer months. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now