Sterling slipped 0.13% against a flat US Dollar as risk appetite turned defensive after reports that a Chinese state-backed group is producing chipmaking machines, triggering a sell-off in ASML. GBP/USD was at 1.3305 after touching 1.3363, with the broader mood also influenced by a pullback in oil prices following a pause in US attacks on Iran over the weekend. President Donald Trump said further military action would follow if talks between Washington and Tehran fail, describing any strikes as “very powerful”.
US data showed Durable Goods Orders for June swung to 0.3% month on month from -4%, though the reading missed forecasts of a 1.6% rise. Attention is on the Federal Reserve meeting, where rates are expected to be held, with the probability of no change at 60% and a 25-basis-point rise at about 40%, according to Prime Terminal. UK data were absent, while markets are also braced for the Bank of England, with policy seen staying at 3.75% despite July’s oil-price jump; GBP/USD remained below a moving-average band near 1.3367, with RSI 14 around 43 and support flagged near 1.3159.
Technical Outlook And Short-Term Trading Implications
We believe derivative traders should prepare for a continued downward push in GBP/USD as technical indicators point toward sustained bearish momentum. With the currency pair trading around 1.3304 and holding below the key 1.3367 simple moving average cluster, the path of least resistance is lower. Historically, when the Relative Strength Index (RSI) hovers in the low 40s without hitting oversold territory, it signals room for a further decline toward the 1.3159 support level.
Given the upcoming Federal Reserve and Bank of England policy decisions, we expect a sharp spike in short-term implied volatility. Current market pricing shows a 40% chance of a surprise Fed rate hike, while the BoE is widely expected to hold its rate steady at 3.75%. Traders can exploit this policy divergence and potential market mispricing by buying short-dated straddles to capture the inevitable breakout.
Macro Risks And Option Strategies
The broader risk-off sentiment, triggered by semiconductor supply chain anxieties and tense negotiations between Washington and Tehran, heavily favors the safe-haven US Dollar. During similar tech-driven market sell-offs, such as the global chip sector correction in the third quarter of 2024, the greenback rapidly strengthened against European currencies. To hedge against these macroeconomic pressures, we recommend utilizing bear put spreads with a target strike near 1.3160 to limit downside risk while keeping premium costs low.
