Before the release of the US PMI: The pound is in a stalemate between bulls and bears, will the short-term direction be revealed soon?
2025-08-05 20:47:07
On Tuesday (August 5), the British pound (GBP)/USD exchange rate fluctuated narrowly around 1.3280, continuing its previous sideways trading pattern. With the Bank of England's upcoming interest rate announcement on Thursday and the US ISM Services PMI data due to be released at 10:00 PM Beijing time tonight, market sentiment has clearly turned cautious, with trading slowing.
In the US, the market will focus on the upcoming release of the ISM Services Purchasing Managers' Index (PMI) for July. Market expectations suggest the index will rise slightly to 51.5 from 50.8 in June, remaining above the boom-bust line for the second consecutive month, suggesting continued moderate expansion in the services sector. Despite this, divergent performance remains within the sub-sectors. The employment index fell to 47.2, indicating continued pressure on services employment, while the new orders index rebounded to 51.3, signaling a recovery in demand. Furthermore, the prices paid index fell to 67.5, indicating persistent inflationary pressures. The recently released PCE price index reinforces this view, with the core PCE rising 2.8% year-on-year in June, well above the Federal Reserve's 2% target.
In the UK, the market generally expects the Bank of England to cut interest rates from 4.25% to 4.00% this Thursday. This would be the fifth rate cut since the start of its easing cycle in August 2024. Despite a faster-than-expected rebound in inflation, weak labor market demand and conservative hiring by businesses amidst increased social security burdens have raised concerns about stagflation in the UK economy. The market generally expects the Bank of England to maintain its "gradual and cautious" pace of easing, and market focus will be on Governor Bailey's press conference to determine the next policy path.
The 4-hour candlestick chart shows that the GBP/USD exchange rate has been declining since its high of 1.3588, reaching a low of 1.3140 before stabilizing and recovering, entering a period of short-term sideways trading. The exchange rate is currently trading near the middle Bollinger Bands, which are converging, indicating shrinking volatility and the possibility of a directional breakout in the future.
Analysts believe that the price is constrained by the pressure at the intersection of the upper Bollinger band (1.3346) and the short-term moving average, and the short-term support is near the previous low of 1.3140. If it falls below, it may further test the 1.31 integer mark.
The MACD indicator shows that the fast line and the slow line have formed a golden cross, but the red bar chart has slowed down and the momentum is limited, indicating that the short-term upward momentum is not sufficient and is still in a tug-of-war between bulls and bears.
The relative strength index (RSI) remained stable around 47.5, in the neutral zone, lacking clear overbought or oversold signals, further proving that the market may remain volatile.
Comprehensive analysis shows that the current exchange rate is near an important technical watershed, and we need to pay attention to whether the Bollinger Band track is effectively broken through to determine the future market direction.
The market is generally maintaining a wait-and-see attitude. On the one hand, there is uncertainty about the Federal Reserve's future path of interest rate cuts. The CME FedWatch tool shows that market expectations for a September rate cut have risen sharply, with the probability rising to 92.2%. On the other hand, the Bank of England is about to cut interest rates, but amid high inflation, the market remains divided on whether it will continue to ease, causing uncertainty in the direction of the British pound.
From the perspective of volatility, the amplitude of the British pound has narrowed significantly in recent days, and the compression of the Bollinger Bands indicates that the market is accumulating energy. If there are unexpected changes in the news, the market may experience violent fluctuations.
In addition, from the non-farm payroll report to the PCE data, traders' perception of the resilience of the US economy has been shaken, causing the market's short-term risk appetite to decline and risk aversion to rise.
Fundamentals:
In the US, the market will focus on the upcoming release of the ISM Services Purchasing Managers' Index (PMI) for July. Market expectations suggest the index will rise slightly to 51.5 from 50.8 in June, remaining above the boom-bust line for the second consecutive month, suggesting continued moderate expansion in the services sector. Despite this, divergent performance remains within the sub-sectors. The employment index fell to 47.2, indicating continued pressure on services employment, while the new orders index rebounded to 51.3, signaling a recovery in demand. Furthermore, the prices paid index fell to 67.5, indicating persistent inflationary pressures. The recently released PCE price index reinforces this view, with the core PCE rising 2.8% year-on-year in June, well above the Federal Reserve's 2% target.
In the UK, the market generally expects the Bank of England to cut interest rates from 4.25% to 4.00% this Thursday. This would be the fifth rate cut since the start of its easing cycle in August 2024. Despite a faster-than-expected rebound in inflation, weak labor market demand and conservative hiring by businesses amidst increased social security burdens have raised concerns about stagflation in the UK economy. The market generally expects the Bank of England to maintain its "gradual and cautious" pace of easing, and market focus will be on Governor Bailey's press conference to determine the next policy path.
Technical aspects:
The 4-hour candlestick chart shows that the GBP/USD exchange rate has been declining since its high of 1.3588, reaching a low of 1.3140 before stabilizing and recovering, entering a period of short-term sideways trading. The exchange rate is currently trading near the middle Bollinger Bands, which are converging, indicating shrinking volatility and the possibility of a directional breakout in the future.
Analysts believe that the price is constrained by the pressure at the intersection of the upper Bollinger band (1.3346) and the short-term moving average, and the short-term support is near the previous low of 1.3140. If it falls below, it may further test the 1.31 integer mark.
The MACD indicator shows that the fast line and the slow line have formed a golden cross, but the red bar chart has slowed down and the momentum is limited, indicating that the short-term upward momentum is not sufficient and is still in a tug-of-war between bulls and bears.
The relative strength index (RSI) remained stable around 47.5, in the neutral zone, lacking clear overbought or oversold signals, further proving that the market may remain volatile.
Comprehensive analysis shows that the current exchange rate is near an important technical watershed, and we need to pay attention to whether the Bollinger Band track is effectively broken through to determine the future market direction.
Market sentiment observation:
The market is generally maintaining a wait-and-see attitude. On the one hand, there is uncertainty about the Federal Reserve's future path of interest rate cuts. The CME FedWatch tool shows that market expectations for a September rate cut have risen sharply, with the probability rising to 92.2%. On the other hand, the Bank of England is about to cut interest rates, but amid high inflation, the market remains divided on whether it will continue to ease, causing uncertainty in the direction of the British pound.
From the perspective of volatility, the amplitude of the British pound has narrowed significantly in recent days, and the compression of the Bollinger Bands indicates that the market is accumulating energy. If there are unexpected changes in the news, the market may experience violent fluctuations.
In addition, from the non-farm payroll report to the PCE data, traders' perception of the resilience of the US economy has been shaken, causing the market's short-term risk appetite to decline and risk aversion to rise.
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