Analysis of GBP/USD: The Pair Approaches 2023 High

Yesterday, the Purchasing Managers' Index (PMI) data for both the UK and the US were released.

According to ForexFactory, the UK figures were as follows:
→ Flash Manufacturing PMI: actual = 52.5, forecast = 52.1; previous = 52.1;
→ Flash Services PMI: actual = 53.3, forecast = 52.8; previous = 52.5.

As SPGlobal reports, the August PMI data signalled another significant expansion (the largest since April) in the UK's private sector output, supported by strong growth in new orders.

In contrast, the US figures were less encouraging:
→ Flash Manufacturing PMI: actual = 48.0, forecast = 49.5; previous = 49.6;
→ Flash Services PMI: actual = 55.2, forecast = 54.0; previous = 55.0.

In response to yesterday’s PMI releases, the GBP/USD rate has been climbing this morning towards the 2023 high around the 1.3140 level. Notably:
→ Since the August low, the pair has risen by over 3.5%;
→ A key driver of bullish sentiment for GBP/USD is the weakness of the US dollar, driven by expectations of a Fed rate cut in September.

Technical analysis of the GBP/USD daily chart today shows:
→ The price has broken upwards out of the consolidation triangle (which we mentioned on 15 August) and confidently surpassed the psychological barrier at 1.3000;
→ The RSI indicator has entered overbought territory;
→ The last few daily candles show long upper shadows, indicating increased selling activity;
→ The upper boundary of the ascending channel (shown in blue) could act as resistance.

Given these factors, it is reasonable to suggest that the rally might be losing momentum, and even if the bulls manage to challenge the 2023 high, it could potentially result in a bull trap.

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