(MENAFN- DailyFX) BRITISH POUND KEY POINT:
- GBP/USD has been range-bound in recent days, but prices could break out soon
- Cable is approaching the upper boundary of a consolidation channel, a key resistance to watch in the coming days
- Several high impact events on the calendar could amplify volatility this week
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Most Read: USD Technical Analysis - DXY Tight Price Action Suggests Move Coming
GBP /USD is slightly higher on Monday , up 0.2% to 1.2302, but has largely lacked directional conviction and traded range bound in recent days. The consolidation behavior, however, could end later in the week, paving the way for a technical breakout amid several key high-impact events on the calendar, including a speech by Fed Chair Powell and BoE's Bailey at the ECB's Sintra retreat.
Towards the middle of the month, cable hit a multi-year low near 1.1934, but then bounced violently above 1.2300 after the UK central bank indicated it would act forcefully if necessary to tackle soaring price pressures. This guidance opened the door to a front-loaded policy response, leading traders to discount an interest rate hike of 50 basis points at both the August and September meetings.
However, current expectations for monetary tightening appear very aggressive in light of the deteriorating health of the UK economy, which could be heading for a recession next year. With activity data set to slow further in the coming months, the Bank of England may not be able to deliver what's priced in, but rather embraced a more measured hiking cycle. This scenario is likely to prevent a significant recovery in sterling over the medium term.
In terms of technical analysis, GPB/USD has been trading within the 1.2175/1.2330 range since June 17, but is now approaching the upper boundary of that interval, a key resistance to watch in the coming sessions. If prices breach this ceiling, bulls could launch an attack on trendline resistance near 1.2415. On further strength, the focus shifts higher to 1.2650.
On the flip side, if GBP/USD pivots lower and resumes its decline, initial support rests near the 1.2175 zone. If consolidation resolves to the downside and the pair falls below this floor, we could see a move towards 1.2040, followed by a retest of the 2022 trough.
GBPUSD TECHNICAL CHART
GBP/USD Chart Prepared Using TradingView
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