GBP/USD: forecast for August 24 - 30
Improved UK inflation data and a declining dollar supported the British pound over the past week. GBP/USD reached 1.5-month highs above 1.5700 (prior strong resistance). The market is now forming a long-legged candle on the weekly chart (bullish signal). It is important for us whether the pound will be able to fix above 1.5730 (trend line on the chart). Next bullish targets could be seen at 1.5800/10 and 1.5870 (50% Fibonacci from the 2014-2015 decline) in this case.
Chart. Daily GBP/USD
British government is gradually preparing for a rate hike, pushing the exchange rate higher. However, you should keep in mind that increased risk aversion and weak US figures could force the Fed to delay the first rate hike. Bank of England will likely follow its US counterpart, switching the hike expectations back into 2016. That’s why we don’t expect the bulls to stay in the sterling for too long.
Next week we'll be watching UK Q2 GDP (second estimate) and the news from the United States.