GBP/USD Awaits PMI Data in Sideways Trend Amid Political Uncertainty

Wednesday Market Overview:

In the UK, voters are heading to the polls on July 4th, with expectations leaning towards a significant Labor Party victory. Analysts predict Labor will secure between 419 and 427 seats. Any outcome short of this range could slightly disappoint the markets, though the impact on the pound is expected to be short-lived. A strong Labor majority might trigger a swift positive reaction in the pound, reminiscent of the Brexit aftermath. However, historically, the pound often weakens in the days following general elections, except for the 2015 election. Currently, UK political developments take a backseat to monetary policy outlooks in terms of market priority.

Technical Analysis:

On the hourly chart, GBP/USD has paused after a bullish move, oscillating between the resistance at 1.26931 and support at 1.26782. The convergence of the Bollinger Bands and the shortening MACD histogram below the signal line indicate reduced market momentum. If buyers regain strength and break through the resistance at 1.26931, the price is likely to reach the immediate target at 1.26972. Continued bullish momentum could then push the price towards 1.27023 and 1.27080.

Alternative Scenario:

If sellers defend the 1.26931 resistance effectively, the price could fall towards the supports at 1.26874 and 1.26782. A break below the lower support at 1.26782, near the middle Bollinger Band, would signal increased bearish pressure, targeting 1.26682.

Market Overview and Key Levels

Resistance Levels:

• Resistance 4: 1.27080
• Resistance 3: 1.27023
• Resistance 2: 1.26972
• Resistance 1: 1.26931

Current Price (at the time of analysis): 1.26912

Support Levels:

• Support 1: 1.26874
• Support 2: 1.26782
• Support 3: 1.26682

Impactful Events:

The Services PMI and Composite PMI reports, due at midday on Wednesday, are expected to cause significant volatility in the GBP/USD pair. Both indices are forecasted to be lower than previous readings. A reading below expectations could reinforce the bearish scenario, focusing on support levels. Conversely, better-than-expected reports could bolster buyer confidence, supporting the continuation of the upward trend.

Technical Indicators and Risk Warnings:

• RSI (Relative Strength Index): Bullish, indicating a potential continuation of upward momentum.
• MACD (Moving Average Convergence Divergence): Mixed, suggesting uncertainty in market direction.
• Moving Averages: Bullish, reflecting the recent positive price action.

Conclusion:

GBP/USD is currently trading sideways, awaiting the release of key PMI data amidst the backdrop of UK political uncertainty. A break above the 1.26931 resistance could lead to further gains. However, if sellers prevail, the pair could test supportsو potentially signaling further declines to 1.26682.

Traders should remain vigilant about the US economic reports, including the ADP employment change and weekly jobless claims, as these will provide further direction for the dollar. The PMI reports later today are particularly critical; weaker-than-expected readings could pressure the pound, while stronger data might support a continued upward trend.