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Bullish Correction Looks Imminent After Recent Sell-Off
Central Bank
Economic
Summary:
The price recently closed above the 100-period moving average at 1.3651, which, if maintained, could pave the way for a bullish continuation toward the next resistance level at 1.3768
Buy
CLOSEDGBPUSD
End Time
1.36300
Entry Price
1.37650
TP
1.35500
SL
1.36513 +0.00071 +0.05%
160
Points
Profit
1.35500
SL
1.36460
CLOSING
1.36300
Entry Price
1.37650
TP
U.K. Prime Minister Keir Starmer and his government have failed to meet their welfare-cutting targets, which were a key part of their budget proposals aimed at regaining control over the UK’s government finances. PM Starmer has also left the possibility of tax increases on the table, sparking backlash from both the markets and political critics. This has led to growing speculation of more governmental instability in the U.K., with many anticipating that PM Starmer will soon begin reshuffling his cabinet to consolidate and maintain control of his party amid a challenging economic environment.
The speculation that Starmer might dismiss his finance minister, Rachel Reeves, sent 10-year bond yields soaring to 4.681%, a 25 basis point increase, marking their highest level since October 2022, when the mini-budget by Liz Truss shook the markets. Meanwhile, there is increasing speculation that Reeves will need to either raise taxes or cut spending plans in the upcoming Autumn Budget.
In the U.S., trade negotiations continue, while President Donald Trump's "One Big Beautiful Bill" remains in limbo. Trump has also once again criticized Federal Reserve Chairman Jerome Powell, calling for his immediate resignation.
In June, U.S. private payrolls fell for the first time in over two years, signaling potential headwinds for the upcoming employment report and contributing to the U.S. dollar’s decline. Data from Automatic Data Processing, Inc. (ADP) released on Wednesday showed that private-sector payrolls decreased by 33,000 in June, following a downward revision of May’s increase to 29,000. This figure was well below the market consensus of 95,000.
Economists expect Thursday’s report to show a modest increase of 110,000 nonfarm jobs in June. Additionally, the Unemployment Rate, the ISM Services PMI, and weekly initial jobless claims will be released, providing further insights into the labor market.
Furthermore, House Republicans have raised concerns over delays in the tax vote, with Andy Harris, leader of the House Freedom Caucus, casting doubt on Trump’s proposed bill. He stated, “It could take another week to get this right,” adding, “I don’t think it’s ready for July 4th.”
The White House revealed that Trump will meet with members of the Freedom Caucus and multiple Republican groups from the House, according to a senior administration official.
Meanwhile, Trump announced a trade deal with Vietnam, under which U.S. goods could be exported with zero tariffs, while the U.S. imposed a 20% tariff on Vietnamese goods and a 40% duty on reexports.
Technical Analysis
GBP/USD has dropped sharply to the 1.3570 level, where it found support from the 200-period moving average on the 2-hour chart. From this level, GBP/USD has begun to recover and stabilize, suggesting that this support could pose a challenge for further downward momentum. The price recently closed above the 100-period moving average at 1.3651, which, if maintained, could pave the way for a bullish continuation toward the next resistance level at 1.3768, near the local high.
Additionally, the RSI dropped sharply, forming a clear divergence, with the RSI reaching a low of 24, entering oversold territory. This indicates that the downward momentum may be losing strength temporarily, which could trigger a rally. Furthermore, the 1.3590 level would act as strong support, coinciding with the 200-period moving average. On the other hand, a strong break below this level would invalidate the bullish setup, opening the door for further losses.
Trading Recommendations
Trading direction: Buy
Entry price: 1.3630
Target price: 1.3765
Stop loss: 1.3550
Validity: Jul 11, 2025 15:00:00
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