GBP/USD Fundamental Backdrop

The pound is back below the 1.18 psychological zone retracing yesterday's gains with the rest of the day heavily focused on U.S.-centric data (see economic calendar below) including the much anticipated Jackson Hole Symposium. While PCE and consumer sentiment data will likely be overshadowed by Jackson Hole, it should not be ignored as the data will hold key information about the U.S. economy. Core PCE (excluding food & energy) is one of particular importance for the Fed and is scheduled to ease slightly which could take away from what has been a very hawkish build-up to Fed Chair Jerome Powell’s speech. Fed speakers have mostly favored the side of higher interest rates to combat inflation so it will be surprising should the Fed Chair decide to pivot away from this narrative.

GBP/USD Economic Calendar

Source: DailyFX Economic Calendar

The Jackson Hole agenda sees Mr. Powell speaking at 0800MT which should equate to 1400GMT.
 

Technical Analysis

GBP/USD Daily Chart

(Click on image to enlarge)

Chart prepared by Warren Venketas, IG

Although still early in its development, daily GBP/USD price action seems to be forming a pattern similar to that of a bear flag or rising wedge. Regardless of the technicalities, both are indicative of a bearish continuation that could ensue should prices break below flag/wedge support (yellow). A breakout could lead to subsequent support coming into focus which does align with the fundamental backdrop.

Key resistance levels:

• 1.1890
• 1.1800

Key support levels:

• Flag/wedge support (yellow)
• 1.1717
• 1.1600
• 1.1410
   

Mixed IG Client Sentiment

IG Client Sentiment Data (IGCS) shows retail traders are currently LONG on GBP/USD, with 78% of traders currently holding long positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment but due to recent changes in long and short positioning, we arrive at a cautious bias.

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