The GBP/USD pair is at an important swing level, and traders are turning their focus to Powell and September’s upcoming data. Recent US inflation data (CPI) mostly matched expectations, increasing talk of a possible rate cut in September. The market now expects at least two rate cuts by the end of the year, with a strong chance for one in September. Any shifts in this outlook may hinge on Powell’s speech at the Jackson Hole Symposium. In the UK, the Bank of England (BoE) made a hawkish cut after an unusual second voting round. Inflation forecasts were increased, highlighting the urgent need to tackle high inflation, which has stayed over 3% since 2021. Although wages are growing, the BoE has a tough path ahead. UK inflation remains one of the highest among major economies, complicating future monetary decisions.

Technical Analysis

Looking at the daily chart, GBP/USD has hit a swing level at 1.3590. Sellers are looking to push the price down to 1.3368, while buyers hope for a rise to 1.38. The 4-hour chart shows a slight upward trend, indicating bullish momentum. On the 1-hour chart, the price is moving in a narrow range, suggesting a strong move could happen if it breaks out in either direction. Upcoming US economic releases include PPI, Jobless Claims, Retail Sales, and Consumer Sentiment. With GBP/USD testing the important 1.3590 resistance level, our immediate attention is on the Jackson Hole Symposium. The market has priced in a strong chance of a Federal Reserve rate cut this September, which is creating a crowded trading opportunity. Recent US initial jobless claims rose to 221,000, indicating a softening labor market, which reinforces this sentiment. On the UK side, the Bank of England is dealing with a complex situation, which opens opportunities. The BoE cut rates last week but issued firm warnings about ongoing inflation, a concern that has persisted since the pandemic. Looking back, UK core inflation has remained stubbornly high throughout 2023 and 2024, lending credibility to the BoE’s renewed worries despite its easing.

Strategic Approaches

In light of this fundamental conflict, we see 1.3590 as a key pivot point for trading strategies in the coming weeks. Traders who expect resistance at this level to hold can buy put options with a strike price slightly below 1.3590 for a low-risk way to prepare for a price drop. This strategy aims for a target of 1.3368, as mentioned in the technical analysis. Alternatively, uncertainty regarding Fed Chair Powell’s upcoming speech may increase volatility significantly. A straddle strategy—buying both a call and a put option at the same strike price and expiration—might be wise. This approach profits from large price movements in either direction, without needing to predict the speech’s outcome accurately. The key point is that the US dollar is generally expected to weaken, while the pound’s strength is built on fragile and conflicting grounds. If Powell hints at a delay in the September cut, the dollar could surge sharply, potentially surprising many traders. Therefore, using options to manage risk is more important than ever in this environment. Create your live VT Markets account and start trading now.

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