To The Moon

GBP/USD experienced a slight pullback during Monday's Asian session, moving away from the three-week high above the 1.3500 psychological level reached on Friday. Although the US dollar has rebounded from post-jobs data lows, diminished expectations for Federal Reserve rate hikes are capping the greenback's gains, keeping the currency pair in a relatively strong position.

US employment data has become a key turning point in the foreign exchange market recently. The US nonfarm payrolls for July fell by 23,000, significantly missing market expectations. Additionally, the number of new jobs added in June was revised down from the previously reported 57,000 to 20,000. Signs of cooling in the US labor market have led to a notable decline in market expectations for the Fed to continue tightening policy in the near term. Following the jobs report, investors quickly adjusted their interest rate forecasts. The market now sees the probability of a Fed rate hike in September falling below 45%, a sharp drop from roughly 67% just a week ago.

However, because rising energy prices could re-ignite inflationary pressures, the market still believes there is a possibility of at least one 25-basis-point rate hike by the end of the year. The dollar has recently found some support from shifts in global risk sentiment. Uncertainty persists regarding the reopening of the Strait of Hormuz, with the market closely monitoring the progress of related negotiations. While diplomatic channels have signaled a potential easing of tensions, shipping safety issues have not been fully resolved, keeping energy supply risks alive. Rising crude oil prices could elevate market inflation expectations and limit a rapid decline in the dollar.

Investors are now awaiting the latest US inflation data to further gauge the Fed's future policy path. If inflation data continues to fall, the market may further lower its rate hike expectations, which could weigh on the dollar and potentially push GBP/USD to extend its uptrend. Conversely, if rising energy prices rekindle inflationary pressures, the likelihood of the Fed maintaining a tightening stance increases, potentially providing new support for the dollar.

On the UK front, the market will focus on the upcoming release of the preliminary second-quarter GDP data. This data will be a key indicator for assessing the resilience of the UK economy and could influence expectations for the Bank of England's future policy. A stronger-than-expected economic performance could support the pound, while weak growth could undermine the currency's recent gains.

Currently, the fundamental outlook for GBP/USD is a mix of opposing forces. On one hand, weakening US employment reduces the dollar's interest rate advantage, providing room for the pound to rise. On the other hand, geopolitical risks, energy prices, and US inflation trends may limit further gains in the pair. The market appears to be in a wait-and-see mode in the short term, preferring to await new economic data for direction rather than following a one-sided trend.

From a daily chart perspective, GBP/USD has been rebounding from around 1.3200, and the uptrend remains intact, with the price trading above key moving averages. Immediate resistance is seen in the 1.3500 to 1.3520 area; a decisive break above this zone could open the path towards the 1.3600 level. Support on the downside is located at 1.3400 and the 1.3300 area. On the daily timeframe, bulls still hold a slight advantage, but the risk of a high-level consolidation is increasing.

On the 4-hour chart, GBP/USD has entered a consolidation phase after its recent rally. Short-term technical indicators suggest that upward momentum is slowing, but no clear reversal signal has emerged yet. If the price holds above the 1.3400 area, the market could still attempt to retest the 1.3500 resistance. A break below this level could lead to a further pullback towards the 1.3300 support zone. The future direction will largely depend on the US CPI data, UK GDP figures, and changes in the US Dollar Index.

The pound sterling is currently in a phase shaped by both shifting US policy expectations and global risk factors. A weakening US labor market is reducing the dollar's upward momentum, offering support to the pound. However, energy price risks and safe-haven demand are still limiting the dollar's decline. In the near term, GBP/USD is likely to maintain a high-level consolidation pattern, with the market awaiting the US inflation data and UK GDP numbers for a fresh directional catalyst. If US inflation continues to fall, the pound retains potential for further upside. But if energy prices drive inflation higher, renewed dollar strength could put pressure on the pound.