British Pound rally loses steam, trading within a range against the US Dollar

The British Pound (GBP) is showing signs of fading momentum as it settles into a trading range against the US Dollar (USD) amid rising geopolitical tensions.

Last Friday, when the GBP was trading at 1.3410, it was indicated that there was a potential for the currency to test major resistance at 1.3445. However, the prevailing view was that a clear break above this level was unlikely, with support held firmly at 1.3390. Although the GBP rose beyond expectations to reach 1.3452, it subsequently staged a sharp retreat back to 1.3392, ultimately closing largely unchanged at 1.3402, marking a decline of 0.05 percent.

Today, the GBP opened with a downward gap. The rapid shift in momentum suggests the currency could break below 1.3360. The next support level at 1.3320 appears unlikely to be reached for now. Resistance sits at 1.3390, and should the currency breach 1.3410, it would signal that the immediate downward pressure has dissipated.

1-3 Weeks View
A positive outlook for the GBP has been maintained since late last month. On Thursday, July 09, with the spot price at 1.3390, it was highlighted that while upside risk remained, the lack of further increase in upward momentum made it uncertain whether the GBP could successfully reach 1.3445. After the currency climbed to 1.3430, it was noted on Friday, July 10, at the 1.3410 spot level, that upward momentum had strengthened somewhat and, if the GBP broke above 1.3445, the next level to watch would be 1.3480.

Subsequent price action did not unfold as anticipated. The GBP did break above 1.3445 and printed a high of 1.3452 before dropping sharply. That decline has continued into today. Although the strong support level of 1.3360 remains unbreached, upward momentum has largely faded. Put another way, the advance seen in the GBP since late last month has concluded, and for the time being, the currency is expected to trade within a range between 1.3320 and 1.3445.

Broader Market Environment
The GBP/USD pair has found some support near 1.3370 following a modest gap-down opening, though it lacks bullish conviction and remains below the 1.3400 mark. The pair is struggling under the weight of renewed haven demand for the US Dollar, driven by fresh military escalations between the US and Iran and the subsequent closure of the Strait of Hormuz. Market attention remains firmly fixed on developments in the Middle East and upcoming central bank discussions.

EUR/USD remains defensive, hovering near 1.1400 during European trading hours on Monday. The pair faces headwinds as the US Dollar begins the week on a strong footing due to increased safe-haven appeal following the weekend escalation between the US and Iran. Nevertheless, hawkish expectations regarding the ECB are limiting the downside for the major, even ahead of speeches from Federal Reserve and ECB policymakers.

Gold has maintained its offered tone throughout the Asian session and is currently trading just above $4,050, down nearly 1.40 percent for the day. A further escalation in US-Iran tensions, coupled with the closure of the Strait of Hormuz, has boosted crude oil prices and revived inflation concerns. This shift bolsters expectations for higher interest rates by the US Federal Reserve, which benefits the safe-haven US Dollar and drives capital away from bullion.

Cardano (ADA) is extending its losses, trading below $0.160 after a decline of over 14 percent in the previous week. Despite on-chain data indicating continued accumulation by large-scale investors known as whales, this buying activity has failed to lift prices. Meanwhile, bearish derivatives metrics and a weakening technical outlook suggest further downside for ADA.

Markets began July pricing in a December rate hike as the base case, spending several trading sessions oscillating between abandoning and revisiting that thesis. A print of 57K payrolls had initially drained tightening bets from the strip, but the re-closure of the Strait of Hormuz is now pushing them back. The minutes from the June FOMC meeting, released on Wednesday, landed in the midst of this cycle, describing a global economic landscape that had already ceased to exist.

What this means for you
Across India: Increased strength in the US Dollar in international markets can put pressure on the Indian Rupee, potentially making imports more expensive.

For Investors: During periods of currency market volatility, exercise caution with foreign exchange-linked investments and keep a close eye on fluctuations in safe-haven assets.

Questions & Answers

1. What is the current support level for the British Pound?
The British Pound has a strong support level currently at 1.3360, while resistance levels are identified at 1.3390 and 1.3410.

2. What is the primary reason for the drop in GBP/USD?
Rising military tensions between the US and Iran and the closure of the Strait of Hormuz have increased the demand for the US Dollar as a safe-haven asset, putting downward pressure on the Pound.

3. What is the expectation for the Pound over the next few weeks?
Analysts believe the recent rally in the Pound has ended, and it is expected to trade within a range between 1.3320 and 1.3445 in the near term.

4. Is there a chance for recovery in Cardano (ADA) prices?
Cardano continues to face downward pressure with a weak technical outlook, suggesting that further losses are likely for the time being.

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