Daily Market Recap – GBPUSD The British Pound Could Return To $1.30

After several months of consolidation, the GBPUSD looks set for a bearish reversal. The pair broke out of its long-term range on Thursday, paving the way for a bearish reversal to 1.30. Looking ahead to this week the Jackson Hole symposium will be crucial.

Under the pressure of the renewed risk aversion on the markets since the beginning of the week and by the growth prospects of a tapering of the Fed by the end of the year, the GBPUSD has broken out from the bottom of its range in which it had been evolving for nearly 6 months between about 1.4250 and 1.3670.

Indeed, the dollar has been strengthening since the release of the Fed's “Minutes” on Wednesday evening, as market participants are almost certain that central bank officials will announce a reduction in the number of asset purchases (tapering) at the next meeting in September or at the October meeting, for a start of tapering before the end of the year.

The Jackson Hole symposium scheduled for the end of next week could give further indications on the beginning of tapering and will therefore be particularly watched by investors. Although no official announcement on monetary policy is possible without FOMC approval, Fed Chairman Jerome Powell could simply moderate his dovish tone during his speech, which would be enough to fuel speculation on the start of tapering and strengthen the dollar.

From a technical perspective, the GBPUSD's exit from its range is a technical signal for a bearish reversal. We can expect the bearish momentum to accelerate over the next few sessions and weeks until the exchange rate reaches the lower range near $1.30. Traders may look to short the pair at the start of the week with a target for the July low.

(Chart Source: Tradingview 22.08.2021)

The July low of $1.35716 will be the immediate support to watch. If the GBPUSD bounces off this level and a clear return to the range occurs, the bearish outlook would be invalidated. The pair will have then formed a rough head and shoulders pattern which may trigger investors to push the rate higher. The outlook would become bullish if the bearish oblique through the May and July highs is breached.

Support & Resistance Levels:

R3 1.40000

R2 1.38729

R1 1.37404

S1 1.35716

S2 1.35000

S3 1.31500

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.