GBP/USD Forecast: Sterling Little Changed Trapped In The Downward Sloping Channel

• Sterling is trading little changed at around mid 1.3200s capped in range of 1.3100-1.3480 representing 38.2 percent and 50 percent Fibonacci retracement of a post-Brexit slump.
• The GBP/USD is now moving within downward sloping trend channel with the key technical oscillators in neutral territory, but pointing in downwards.

The GBP/USD is trading flat at around 1.3260 against the US Dollar as the key European summit is planned for the last two days of this week with the Brexit related issues being on the top of agenda. 

The GBP/USD leaped off the cyclical low of 1.3100 last week after the Bank of England Monetary Policy Committee (MPC) left the Bank rate unchanged at 0.50 percent in line with expectations, but the voting pattern of the nine-members strong Committee shocked the market with the Bank’s chief economist Andrew Haldane joining Ian McCafferty and Michael Saunders in voting in favor of a rate hike making it 6-3 instead of 7-2 expected.

Apart from the hawkish turn in the voting pattern, the overall tone of the June monetary policy statement was more hawkish, indicating that the UK economy is actually doing a bit better than the first-quarter data point out and that the UK labor market tightness is set to drive inflation higher, justifying the rate hike.

With the final reading for the first quarter GDP scheduled for Friday this week and MPC’s hawkish twist last week, the spotlight will be on political development, especially concerning Brexit news from the European summit. 

Technically, the GBP/USD leaped off 1.3100 representing 38.2 percent Fibonacci retracement line of a post-Brexit slump from 1.5020 to 1.1940 and after breaking round big figure of 1.3200 it tested 1.3300 level to retreat lower. The GBP/USD is currently moving within downward sloping trend channel with the key technical oscillators in neutral territory, but pointing in downwards on the 1-hour chart. With Momentum and the Relative Strength Index pointing downwards after reaching highs last week, the directional price move should be downwards towards 1.3200 level
The immediate target remains 1.3300 on the upside with the break above targeting 1.3350 and 1.3400 next. On the downside, the 1.3200 is the next hurdle before testing 1.3100 again.