British pound analysis: GBP/USD holds support in the mid-1.23s

GBP/USD takeaways

Despite a quiet economic calendar to start the week, GBP/USD has seen some volatile price action on the back of the US Services PMI report.
GBP/USD continues to find support at the bottom of its 2-month range in the low- to mid-1.2300s.
The near-term bias remains for a continued grind higher given the longer-term uptrend and well-defined support zone.

GBP/USD fundamental analysis

It’s been a quiet start to the week’s trade in the UK, with essentially no economic data on the calendar today. The only report of note was the revision to the flash Services PMI report, a negligible tick up to 55.2 from the initial estimate of 55.1.

Meanwhile, across the proverbial pond, the US saw an eye-raising data point. The ISM Services PMI survey for May came in at 5003, well below the 52.6 reading expected after last month’s 51.9 print. Notably the “Prices Paid” component of the survey was just 56.2 vs. 59.6 last month; this marks the lowest price pressures in this survey since May of 2020!

Between a chorus of Fed speakers coming out in favor of a pause and the middling economic US economic data of late, it’s increasingly difficult to see the Fed hiking interest rates this month unless next week’s CPI report is truly elevated. Instead, Jerome Powell and company may prefer to gather another six weeks of data on how the past 15 months’ worth of rate hikes are impacting the economy before making that decision at the end of July.

British pound technical analysis – GBP/USD daily chart

Source: TradingView, StoneX

As the GBP/USD chart above shows, cable has been edging higher in fits and starts since bottoming near previous support in the lower-1.2300s about 10 days ago. The pair dropped sharply to retest the mid-1.2300s earlier today before buyers again stepped in to defend that area.

From a technical perspective, GBP/USD remains above its rising 50- and 100-day EMAs, with rates in the lower half of the two-month range between about 1.2325 and 1.2650, potentially setting the stage for a continued bounce toward the top of that range as we move through the month.

Looking ahead, tonight’s UK BRC Retail Sales Monitor and tomorrow’s Construction PMI figures out of the UK are likely to lead to some volatility, but the ongoing bounce off the bottom of the medium-term sideways range remains the dominant storyline for now.

-- Written by Matt Weller, Global Head of Research

Follow Matt on Twitter: @MWellerFX

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.