The GBP/USD currency pair traded with very low activity on Monday. As we have already noted, the fundamental background remains strong and significant, but traders seem to have paused to understand the current situation better. In our view, there is nothing new to analyze, as nothing has changed in the key global themes. The U.S. economy is growing, yet faces serious problems with business activity, inflation, and the labor market. Trade tariffs continue to be imposed by Donald Trump with enviable regularity. The battle against the Federal Reserve has taken a slightly different form, but it is still ongoing. Kyiv and Moscow are moving toward their first negotiations in 3.5 years, which could halt the military conflict. It should be recalled that this last factor is also negative for the dollar.
Why negative? The end of the war in Ukraine will boost demand for risk assets and currencies in the same way that demand for safe-haven assets and currencies rises during periods of heightened geopolitical tension. In other words, whichever way you look at it, the dollar has no clear grounds for medium-term growth.
It should also be noted that the dollar has been falling for a relatively short period and has not declined much. Open the monthly timeframe, and you will see how long the dollar had been rising against all its competitors up until 2025. Therefore, a six-month decline is almost nothing from a long-term perspective. We are certain that the dollar has not exhausted its potential for decline, and that Trump’s policy will continue to exert a damaging effect on it.
Today, the U.S. will release its inflation report, which… now has almost no significance. Over the past few years, many traders have become accustomed to inflation being one of the most important indicators. Monetary policy decisions by virtually any central bank largely depended on it. However, at present, even though U.S. inflation is accelerating again, the labor market is coming to the forefront. Jerome Powell has repeatedly said that the Fed may change its position only if the economy approaches a recession or the labor market starts experiencing problems. The U.S. Bureau of Labor Statistics confirms that problems have begun.
Therefore, it no longer matters whether inflation rises or falls—the Fed needs to save the labor market. Of course, we do not believe the U.S. central bank will cut the key rate at every meeting starting from September. However, the main thing in this process is to begin. The Fed may cut the rate at two meetings, and with the New Year approaching, perhaps some members of the monetary committee will “want” to step down before their term ends. Trump likely has a couple of replacements ready, who will be willing to vote for rate cuts under any circumstances. And then May 2026 will not be far away— Powell will resign, and a new person will come in, most likely holding a dovish stance. Thus, in essence, in September, we could see the beginning of a global easing of monetary policy. Needless to say, monetary easing is a bearish factor for a currency, and the dollar had been falling throughout the first half of the year even with the Fed’s high rate.
The average volatility of GBP/USD over the past five trading days stands at 73 pips, which is considered “moderate” for the pound/dollar pair. On Tuesday, August 12, we therefore expect movement within a range bounded by levels 1.3345 and 1.3491. The long-term linear regression channel is directed upward, indicating a clear upward trend. The CCI indicator has twice entered the oversold area, signaling a possible resumption of the upward trend. Several bullish divergences have also formed.
Nearest Support Levels:
S1 – 1.3428
S2 – 1.3367
S3 – 1.3306
Nearest Resistance Levels:
R1 – 1.3489
R2 – 1.3550
R3 – 1.3611
Trading Recommendations:
The GBP/USD currency pair has completed another phase of a downward correction. In the medium term, Trump’s policy is likely to continue putting pressure on the dollar. Therefore, long positions with targets at 1.3550 and 1.3611 remain much more relevant as long as the price is above the moving average. If the price is below the moving average, small short positions with targets at 1.3306 and 1.3245 can be considered on purely technical grounds. From time to time, the U.S. currency shows corrections, but for a sustained trend reversal, it needs real signs of the end of the global trade war, which now appears unlikely.
Explanation of Illustrations:
Linear Regression Channels help determine the current trend. If both channels are aligned, it indicates a strong trend.
Moving Average Line (settings: 20,0, smoothed) defines the short-term trend and guides the trading direction.
Murray Levels act as target levels for movements and corrections.
Volatility Levels (red lines) represent the likely price range for the pair over the next 24 hours based on current volatility readings.
CCI Indicator: If it enters the oversold region (below -250) or overbought region (above +250), it signals an impending trend reversal in the opposite direction.
