Trading idea for GBP/USD on July 2, 2024
After yesterday's growth, when the pound peaked at 1.2709, the maximum level on June 20, on Tuesday, GBP/USD is declining, trading at 1.2640. Despite a promising start to the week, buyers were unable to hold their positions, and sterling fell by 60 pp, ending yesterday's session at 1.2649.
Weak data on UK business activity did not allow sterling buyers to develop an offensive. In June, the British manufacturing activity index fell from 51.2 to 50.9 points, indicating a possible stagnation of the economy. The latest study by the Confederation of British Industrialists showed an expansion in order volumes and delivery times, as well as an increase in production costs since the beginning of 2023. According to Nationwide Building Society, the real estate price index decreased from 0.4% to 0.2% (mom). Analysts point out that British household incomes are still insufficient to compensate for high mortgage rates. Political risks also remain a negative factor for the pound. Parliamentary elections in the UK will be held on July 4, and according to polls, the Labour Party is leading by a margin of 20 percentage points. Prime Minister Rishi Sunak acknowledged the possibility of a defeat for the Conservative Party, which would allow the winning party to form a new government.
In addition to the above, the growth of GBP/USD is holding back the strengthening of the dollar. Mary Daley, President of the Federal Reserve Bank of San Francisco, said in an interview with CNBC that the Fed's monetary policy is generally effective, but the regulator will need more time to fully control inflation. Markets are expecting today's speech by Fed Chairman Jerome Powell at 13:30 GMT. If Powell confirms his intention not to rush into monetary policy easing, the dollar will continue to strengthen, which will create additional pressure on the pound.
In accordance with fundamental analysis, readings of technical indicators and graphical patterns, we consider the sale of GBP/USD
- Sell stop 1.2610
- Target 1.2400
- Stop loss 1.2680.