Last week, pressure on the pound was linked to expectations of further rate cuts by the regulator: in early August, borrowing costs were reduced to 4.00%, though nearly half of the board opposed it. Inflation data complicates the dovish course, while business activity remains a supportive factor: in August, the services PMI rose from 51.8 to 53.6, and the manufacturing PMI slowed from 48.0 to 47.3, pushing the composite index up from 51.5 to 53.0, its highest since early spring.
The US dollar stabilized after Friday’s decline and trades near 97.70 in the USDX, as expectations for a Fed rate cut in September increase. In his Jackson Hole speech, Jerome Powell addressed two issues: citing weaker employment data with downward revisions for June and July, he highlighted labor market cooling and signaled readiness to ease policy, with details depending on size and duration. He also acknowledged tariff impacts on consumer prices. According to CME FedWatch Tool, the probability of a September rate cut rose from 73.0% to 87.3%.
Support and resistance levels
On the daily chart, the pair is trading slightly below the neckline of a “head and shoulders” reversal pattern near 1.3590.
Technical indicators signal buying: fast EMAs on the Alligator indicator are above the signal line, while the AO histogram is forming corrective bars in the positive zone.
Resistance levels: 1.3590, 1.3790.
Support levels: 1.3410, 1.3140.
Trading scenarios
Long positions can be considered after a rise and consolidation above 1.3590, targeting 1.3790, with a stop-loss at 1.3510. Implementation period: 7 days or more.
Short positions can be considered after a decline and consolidation below 1.3410, targeting 1.3140, with a stop-loss at 1.3500.
Scenario
Timeframe: Weekly
Recommendation: BUY STOP
Entry point: 1.3590
Take Profit: 1.3790
Stop Loss: 1.3510
Key levels: 1.3140, 1.3410, 1.3590, 1.3790
Alternative scenario
Recommendation: SELL STOP
Entry point: 1.3410
Take Profit: 1.3140
Stop Loss: 1.3500
Key levels: 1.3140, 1.3410, 1.3590, 1.3790