Is GBP/USD Ready for a Comeback? Signs of a Rebound Emerge

Over the past week, GBP/USD has experienced significant volatility. Since the Bank of Japan decided to raise interest rates, there has been a substantial shift in the market. However, despite their subsequent announcement of a pause in rate hikes, this hasn't entirely calmed market sentiment.

The Bank of England's likely decision to keep rates higher for longer, due to the possibility of slower rate cuts, is quite favorable for the pound. Meanwhile, it will be interesting to see how the market reacts when the Federal Reserve and the European Central Bank cut rates again.

Key Data Releases This Week:

UK Data:

August 13: The UK unemployment rate is set to be released, with the market expecting an increase from 4.4% to 4.5%. A rise in unemployment could support further rate cuts in the UK, potentially weighing on the pound.
August 15: The second-quarter GDP revision for the UK will be published. The market expects a growth rate of 0.9%, an improvement from the previous figure. If the GDP data is strong, it could further support the pound.

US Data:

August 14: The US will release its July CPI data, with the core CPI expected to remain unchanged at 3.0% year-on-year. However, if inflation shows signs of slowing, it may heighten expectations of a slower pace of Fed rate hikes, putting pressure on the dollar.
August 16: The US will also release July retail sales and the initial jobless claims for the week ending August 10. Stronger-than-expected data could provide support for the dollar.
Technical Analysis:

From a technical perspective, GBP/USD currently has a significant support level near 1.2680, with resistance above at 1.2850. The current rebound has faced resistance at the prior level of 1.2850. If GBP/USD fails to break through this resistance, it could retest the 1.2680 support level.

Forecast and Strategy Recommendations:

Short-term: Due to the market's sensitivity to upcoming economic data releases, GBP/USD may fluctuate between 1.2680 and 1.2850. If UK data underperforms while US data is strong, GBP/USD could break below the 1.2680 support level, potentially falling towards 1.2600 or even lower.

Medium to Long-term: If GBP/USD successfully breaks through the 1.2850 resistance level and sustains above it, it could see further strength, possibly testing the psychological level of 1.3000.

Strategy Recommendations: Investors may consider entering short-term long positions near 1.2680, with careful stop-loss placement. Additionally, if GBP/USD breaks above 1.2850, pursuing a long position targeting 1.3000 could be considered. However, caution is advised if UK data disappoints, as GBP/USD could face downside risks below 1.2680.