The pound was expected to rebound after it lost nearly 100 pips on Friday. Subsequently, the market entered a sideways movement, driven not only by the absence of any economic data but also by the Labor Day holiday in the United States.
Today, traders await the bloc's Producer Price Index data for July, which is expected to accelerate from -3.4% to -7.8%. However, recent inflation estimates clearly hint that the decline in producer prices may not be as impressive. This, in turn, suggests a softer decline in inflation. And this is a prerequisite for further rate hikes by the European Central Bank. So, the euro could strengthen a bit more, pulling the pound along with it. But if the forecasts are confirmed, the dollar will likely rise. Such a sharp decline in producer prices will undoubtedly push inflation downward. As a result, it may be time for the ECB to consider the possibility of easing monetary policy.
The GBP/USD pair regains footing after plummeting on Friday. However, there are no crucial changes, and a downward cycle that started back in July is still on the chart.
On the four-hour chart, the RSI indicator is moving in the lower area of 30/50, thus reflecting bearish sentiment among traders.
On the same chart, the Alligator's MAs are headed downwards, which corresponds to the pair's direction. The change in the MA's direction happened when the volume of short positions had increased.
Outlook
To increase the volume of short positions, the price should stay below the 1.2550 level. In this case, we will receive a technical signal for extending the downward cycle. Otherwise, the pair could move sideways around the base.
The complex indicator analysis points to a downward cycle in the short-term and intraday periods.
