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Pound Bulls Reignite, Upside Target of 1.3950 in Sight
Summary:
The Great British Pound (GBP) fundamentals are at a crossroads of "economic recovery + policy easing expectations," while the US dollar (USD) faces dual constraints from "rate cut expectations + improved risk appetite." This dynamic is expected to drive GBP/USD higher.
Trading
1.36070
ENTRY
1.39100
TGT
1.35100
SL
-- -- --
0
Point
Flat
1.35100
SL
CLOSING
1.36070
ENTRY
1.39100
TGT
Fundamentals
Recently, the UK economy has shown signs of recovery. The latest data reveals that the UK Services PMI rose sharply to 52.8 in June from 51.3 in May, marking the highest level since August last year, driven by sustained domestic demand and a surge in new business. However, firms remain cautious about hiring due to rising labor costs. The Composite PMI climbed from 50.7 to 52, indicating that the broader private sector continues to expand moderately while manufacturing remains under pressure. With easing price pressures and slower business cost growth, market expectations for a Bank of England rate cut in August have increased, especially as inflation has steadily declined from its peak with the May CPI annual rate dropping to 3.4% from 3.5%.
Meanwhile, risk appetite in the US is improving, weighing on the US dollar. The latest Fed meeting minutes showed that most officials support initiating rate cuts later this year, reiterating no urgency for further hikes. This has tempered market expectations for US dollar tightening. Additionally, the US Dollar Index dipped slightly to 97.40 on July 10th. As the US dollar's "safe-haven + yield advantage" weakens, capital is flowing out of dollar-denominated assets and into markets like the UK in search of higher returns and capital appreciation.
Regarding the UK's political and financial situations, the ruling party faces turbulence over welfare reforms and property tax decisions, leading to short-term pressure on the GBP. However, the recently signed UK-US trade deal has bolstered confidence in the UK's medium-to-long-term growth prospects.
Therefore, the UK is at an inflection point of "economic recovery + policy easing expectations," while the US dollar contends with "rate cut expectations + improving risk appetite," creating favorable conditions for GBP/USD upside.
Technical Analysis
As of the European session today, GBP/USD is trading at 1.3613, gradually rising after climbing over 33 pips from the intraday low of 1.3579. Both technical indicators and price action suggest continued bullish momentum.
Based on the daily chart, GBP/USD recently retraced to the rising trendline connecting previous lows and stabilized with a bullish doji candlestick yesterday, confirming a resumption of upward momentum. The moving averages are also arranged in a bullish formation, reinforcing the upside bias.
Regarding technical indicators, the RSI is in neutral-to-bullish territory, with its curve turning upward again, suggesting a higher likelihood of near-term gains.
On the upside, the first target is the previous high of 1.3788. A breakout above this level could propel GBP/USD toward the 1.3950 resistance zone. The recommended strategy is to buy the dips.
Trading Recommendations
Trading direction: Buy
Entry price: 1.3600
Target price: 1.3910
Stop loss: 1.3510
Valid Until: July 24, 2025, 23:00:00
Support: 1.3525/1.3370
Resistance: 1.3788/1.3950
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A senior trader with rich trading experience, proficient in naked K trading, and has accumulated rich practical experience in the fields of stock market, foreign exchange and commodities. With deep market insight and excellent trading skills, he can seize opportunities in complex market environment and provide investors with accurate and effective trading strategies. With his superb analytical ability and rich market experience, he is committed to pursuing excellent performance in the global financial market.
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