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Forecast for GBP/USD on July 19. Wage growth in the UK has started to slow down. And inflation is rising

Relevance up to 06:00 2022-07-20 UTC–4

According to the hourly chart, the GBP/USD pair continued the growth process on Monday, but at some point, it still reversed in favor of the US currency and returned to the level of 1.1933. From this level, a rebound was performed tonight with a reversal in favor of the British and a resumption of growth in the direction of the corrective level of 523.6% (1.2146). Thus, the euro and the pound traded almost the same again on Tuesday. Only the euro rose a little stronger. Remember that the euro began to grow even before the inflation report, and the British pound rose on reports that did not assume growth. The unemployment rate in the UK at the end of May was 3.8%, as it was a month earlier. Wages increased by 6.2%, although various forecasts indicated an increase of 6.7% to 7.8%. It turns out wages have grown weaker than any forecast and cannot be considered positive for the British economy. Let me remind you that inflation in the UK is already approaching 10%. Therefore, for British workers to not feel a strong rise in prices, their wages should grow at the same pace as inflation.

But, as we can see, salaries are growing less quickly. Plus, it can be assumed that wages are not growing at the same pace for different professions and positions. As usual, low-income people suffer the most, of whom the majority. Thus, I believe the British data released this morning could not force traders to buy the pound. And what happens? The euro rose before the inflation report, and the pound had no reason to show growth. Then maybe we are witnessing a growth that is unrelated to the information background? After all, yesterday, the euro and the pound also showed growth, although there was no news from Britain, the EU, or the USA. This option seems to be the most likely now. The European and the British have been falling for a long time, so now they can grow due to the usual correction.

On the 4-hour chart, the pair continues the growth process after forming a “bullish” divergence at the MACD indicator and has secured above the level of 1.1980 today. Thus, the growth process can be continued in the direction of the downward trend line, which still characterizes the mood of traders as “bearish.” The rebound of the pair’s quotes from this line will favor the US currency and the resumption of the downward trend.

Commitments of Traders (COT) Report:

The mood of the “Non-commercial” category of traders has become a little more “bearish” over the past week. The number of long contracts in the hands of speculators decreased by 5,768 units, and the number of short – by 2887. Thus, the general mood of the major players remained the same – “bearish,” and the number of short contracts still exceeded the number of long contracts by several times. The big players continue to get rid of the pound for the most part, and their mood has hardly changed lately. So I think the Brit could continue its decline over the next few weeks. The Briton has certain chances for growth, but we are interested in a new trend, not a two- or three-day growth, after which everything will return to normal.

News calendar for the USA and the UK:

UK – average salary level, including bonuses (06:00 UTC).

UK – unemployment rate (06:00 UTC).

US – number of construction permits issued (12:30 UTC).

All the reports of the day have already been released in the UK on Tuesday, and one more or less important report is scheduled for the second half of the day in the USA. Thus, I believe that the influence of the information background in the afternoon will be weak.

GBP/USD forecast and recommendations to traders:

I recommend new sales of the British when rebounding from the level of 1.2146 on the hourly chart or when rebounding from the trend line on the 4-hour chart. I recommended buying the British when fixing above the level of 1.1980 on the 4-hour chart. The nearest target is the level of 1.2146. These deals can now be kept open.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

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