Fundamental analysis of GBP/USD

The GBP/USD pair experienced some fluctuations on Wednesday and eventually declined to the 1.27000 level. Initial support came from the Bank of England's hawkish monetary policy, but the US Non-Farm Payrolls data pushed the pair into negative territory. 
 

 In the UK, everyone is looking forward to important dates in the economic calendar, including the final services PMI data for July, which could ease the stakes for the next two rate hikes. However, other data such as wage growth and producer prices are set to fall sharply to change sentiment on the Bank of England's post-summer rate hike. The Bank of England's upcoming rate decision will be the main determinant of the 25 basis point rate hike. The voting composition and minutes of the meeting will also be scrutinized as investors expect two consecutive rate hikes. A more dovish rate hike could weigh on GBP/USD, so a lack of commentary from Monetary Policy Committee members is expected, prompting Andrew Bailey to comment after the decision. 
 
 The US session remains busy as the focus is on initial UI claims and the core ISM non-manufacturing index, which is expected to fall to 53.0. With the service sector in the US accounting for over 70% of the economy, signs of weakening activity could raise recession fears. Factors such as layoffs, new orders and product prices are important sub-components to consider.
International influences include China's services PMI data, which rose to 54.1 in July, beating forecasts.  
The Bank of England's prime rate is expected to be raised by 25 basis points from 5.00% to 5.25% on Thursday, August 3. While some analysts are discussing the possibility of a 50 basis point rate hike, the general consensus is leaning in favor of a 25 basis point increase. In June, the Bank of England surprised markets with a 50 basis point rate hike, leading to scrutiny of UK inflation rates and labor market data. While record inflation initially supported a 50 basis point rate hike in August, the slowdown in UK inflation in June dampened those expectations. Markets currently rate the probability of a 25 basis point rate hike at 65% as concerns about excessive tightening weigh on the bank's decisions. The Bank of England's updated economic forecasts, its views on inflation and the composition of the vote will be important. A split vote in favor of a long-awaited rate hike and a change in expectations could have a major impact on the Pound. A hawkish rate hike could be a positive factor, but lower growth and inflation forecasts without committing to a future rate hike could lead to a sharp sell-off in GBP/USD. 
 
Overall, multiple domestic and international factors are creating a challenging situation for the GBP/USD pair, and the uncertainty surrounding the Bank of England's decision makes us expect continued volatility. Detailed indicators such as UK economic data, the Bank of England's stance, US employment data and global PMIs will need to be paid attention to in the coming days. Bank of England Governor Bailey's press conference after the Bank of England policy announcement may also bring fresh information, making this an interesting time for Sterling traders.
Technical Analysis and Scenarios:

Stochastic Oscillator: With a value of 24.5893 and a signal of 25.9778, it is approaching oversold territory. This suggests that the pair may continue its downward movement in the short term. Bollinger Bands: Price is declining in the lower band range and the bands are widening. This tends to indicate increased volatility and a continuation of the existing trend, which is currently downward. The MACD value is negative and is below its signal line, indicating bearish sentiment.
Main scenario (SELL)
Recommended entry level: 1.26500.
Take Profit: 1.25860.
Stop Loss: 1.26900.
Alternative scenario (BUY)
Recommended entry level: 1.27450.
Take Profit: 1.28080.
Stop loss: 1.27050.