The British pound dropped on Wednesday, moving away from recent 29-month highs against the US dollar, as investors took profits. The currency had previously gained strength after Bank of England (BoE) Governor Andrew Bailey made bullish remarks at the Jackson Hole event, which reduced the likelihood of an interest rate cut in the UK this September. In contrast, US Federal Reserve Chair Jerome Powell hinted at a possible rate cut in September, creating a different outlook for US interest rates. As a result, the gap between UK and US interest rates may narrow, potentially supporting the pound against the dollar. However, uncertainty remains as markets closely watch upcoming decisions from both central banks.
GBPAUD – H2 Timeframe
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GBPAUD recently broke above the high around the 1.94771 price mark; making a corrective move shortly after. The current price action is an extension of the corrective move, which I expect would bring price into the 76% region of the Fibonacci. The demand zone aligns well within the target area of the Fibonacci, and provides additional confluence to the trendline support and pivot zone.
Analyst’s Expectations:
Direction: Bullish
Target: 1.96020
Invalidation: 1.92690
GBPCAD – H4 Timeframe
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The 4-hour timeframe chart of GBPCAD presents a simple market structure template. We see the previous break of structure to the left, followed by a retracement move that is now approaching the area of interest. The area of interest features a drop-base-rally demand zone, a trendline support, and a 100-period moving average support. All of these factors lead me to reason in favor of a bullish sentiment.
Analyst’s Expectations:
Direction: Bullish
Target: 1.78550
Invalidation: 1.76872
CONCLUSION
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