GBP/USD Price Analysis: Posts weekly losses, directionless beneath 1.2650

GBP/USD Price Analysis: Posts weekly losses, directionless beneath 1.2650
  • GBP/USD steady following a positive UK GDP report and rising US PCE Index.
  • Technicals cap pair below 1.2700, key for buyer momentum.
  • Strong support at 1.2634/45 (50 & 100-DMAs); RSI suggests seller dominance, risk of more losses.

The GPB/USD is subdued during the North American session on Friday following a positive UK GDP report, yet an uptick in the Fed’s preferred gauge of inflation, the PCE Price Index, capped the major, which trades at 1.2642, virtually unchanged.

GBP/USD Price Analysis: Technical outlook

After bouncing off the weekly lows reached on Wednesday, the GBP/USD capped its losses and remained below the 12700 psychological figures, a crucial level for buyers to regain control.

However, sellers are also pressured as they face strong support at the confluence of the 50 and 100-day moving averages (DMAs) at around 1.2634/45, which, if cleared, could exacerbate further downside.

The Relative Strength Index (RSI) hints sellers remain in control, meaning further losses are expected.

The psychological figure of 1.2600 would be the first support. Once surpassed, the next demand zone to challenge would be the 200-DMA at 1.2555, followed by the 1.2500 mark.

For a bullish continuation, traders must claim 1.2700 and clear a previous support trendline turned resistance at around 1.2730/40.

GBP/USD Price Action – Daily Chart

Pound Sterling FAQs

The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, aka ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).

The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.

Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.

Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.

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