GBP/USD ANALYSIS
The British pound gained ground against the U.S. dollar, but its advance was limited, as traders embraced a cautious position and avoided taking large directional bets ahead of the August U.S. payrolls report due for release on Friday.
Given the Fed’s data-dependent approach, labor market incoming information will play a crucial role in determining the FOMC’s next moves, with strong job gains bolstering the case for more monetary tightening and weak employment growth diminishing the prospects of further policy firming.
Taking a look at the technical picture, GBP/USD has started to perk up after encountering support at 1.2555 late last week following a sharp sell-off, but the bounce seems to lack conviction on Monday, a sign that cable is not out of the woods yet.
For clues on the outlook, traders should closely watch price action in the coming days. That said, if GBP/USD manages to extend its rebound, the first ceiling to consider rests at 1.2620, followed by 1.2680. On further strength, the bulls could muster the momentum for an attack on trendline resistance at 1.2750.
Conversely, if sellers regain the upper hand and spark a bearish reversal, initial support appears at 1.2555, and 1.2445 thereafter. In the event of a breakdown, the crosshairs will be fixed on the 200-day simple moving average, followed by 1.2315, the 61.8% Fib retracement of the 2023 rally.
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GBP/USD TECHNICAL CHART
GBP/USD Chart Created Using TradingView
GBP/JPY ANALYSIS
Sterling also rose against the Japanese yen on Monday, extending its recovery for the second consecutive trading session after bouncing off technical support at 183.30 last Friday, with the latest advance likely bolstered by dovish comments from the Bank of Japan over the weekend.
BoJ Governor Kazuo Ueda said policymakers will maintain the current monetary easing framework as core inflation remains "a bit below target." These statements suggest the central bank will probably not adjust its yield curve control program again this year following July’s surprise tweak, nor will it abandon negative interest rates for the foreseeable future.
BoJ’s ultra-accommodative stance will prevent the yen from gaining much traction against the British pound for now, especially if Bank of England continues to hike interest rates as part of a strategy to curb price pressures in the economy. By way of context, the UK has the most persistent inflation in G10, with headline CPI clocking in at 6.8% y-o-y in July.
Focusing on technical analysis, GBP/JPY remains entrenched within an undisputable uptrend despite recent softness, with prices trading above key moving averages and displaying impeccable higher highs and higher lows.
However, to be confident in the bullish outlook, the pair needs to break above the 2023 peak at 186.76 in the near term. If this scenario plays out, buying interest could gain impetus, paving the way for a move to 189.00. In the event of a pullback, initial support lies at 183.30, followed by 182.65. On further weakness, we could see a drop towards 181.00.
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| Change in | Longs | Shorts | OI |
| Daily | -4% | 0% | -2% |
| Weekly | 18% | 15% | 16% |
GBP/JPY TECHNICAL CHART
GBP/JPY Chart Prepared Using TradingView
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