the GBP/USD continued with its strong downtrend yesterday after making a small retracement to 1.2250. The US interest rate cut of 0.25% by the FED (central bank) did not spur USD weakness because the markets most likely had already priced in the rate change.
The GBP/USD is now facing a second interest rate decision – today (1 August) with the GBP and the Bank of England (BOE). For the moment the US interest rate change from 2.25-2.50% to 2.00-2.25% did initiate USD weakness but in fact created a little bit of USD strength as the FED lowered expectations of future rate cuts. In any case, the GBP/USD continued its downtrend with a new low and is aiming for the round level at 1.20 via wave 3 (green).
The GBP/USD reversed at the 50% Fibonacci retracement level of wave 4 vs 3 and then broke below the support trend line (dotted blue) for a downtrend continuation. The main targets are the Fibonacci levels of wave 5 vs 1+3. The 1.20 round level could be a psychological support and a zone where the wave 3 (green) might finish.
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