Data released on Friday on the Personal Consumption Expenditure (PCE) price index showed a slowdown in inflation, raising expectations that the Fed could begin easing monetary policy in September. There is speculation that, throughout 2024, the Fed could implement at least two rate cuts, each of 25 basis points. In parallel, the Bank of England is expected to adopt a more dovish stance due to concerns about persistent inflation in the country.
On Friday 28 June, UK statistics reinforced the possibility of a wait-and-see approach by monetary authorities. The third and final estimate of first quarter GDP showed growth of 0.7% quarterly and 0.3% yearly, beating forecasts of 0.6% and 0.2% respectively. This was the best performance among G7 countries. Real household income fell by 0.7% and business investment declined by 0.5%, below the 0.9% expected.
Today at 10:30 (GMT+2), UK consumer credit statistics will be published. Net lending is expected to have increased from £3.1 billion to £3.3 billion in May, while the number of mortgage applications is likely to have slowed from 61,140 to 61,000.
Support and resistance levels
On the daily chart, Bollinger Bands indicate a downward trend, with a narrowing price range, reflecting mixed trading in the short term. The MACD points to growth, forming a new buy signal, with the histogram trying to position itself above the signal line. Stochastic, in turn, is also showing a bearish trend, moving away from the “20” level and suggesting a possible bullish development in the coming periods.
Resistance levels: 1.2700, 1.2739, 1.2771, 1.2800
Support levels: 1.2650, 1.2600, 1.2568, 1.2539
Trading scenarios
Long positions: Can be considered after a firm break of 1.2700 level, targeting 1.2800. Place Stop Loss at 1.2650. Timeframe: 2-3 days.
Short positions: The return of the bearish momentum and the subsequent break of the 1.2600 level downwards could indicate the opening of new short positions, targeting 1.2500. Place the Stop Loss at 1.2650.
With an eye on the Federal Reserve's moves and UK statistics, the market continues to adjust its expectations, offering opportunities for both bulls and bears. Stay tuned for upcoming economic data and prepare your strategies!
