GBP/USD Price Analysis – May 18, 2023
Daily Price Outlook
Despite the Bank of England Governor Bailey's hawkish comments, the GBP/USD pair was unable to continue its previous upward trend and experienced a decline around the 1.2429 level. This was being pressured by the strength of the US dollar, which received support from recent hawkish remarks made by several FOMC members.
The USD Index (DXY), which measures the performance of the US dollar against a basket of currencies, reached a six-week high due to speculations that the Federal Reserve (Fed) will maintain higher interest rates for an extended period.
Bank of England Governor's Hawkish Remarks Support GBP/USD, US Dollar Pressure Prevails
It is worth noting that the British Pound received some support after the Bank of England Governor, Andrew Bailey, made hawkish comments regarding inflation and the need to bring it back to the target of 2%. This helped attract buyers for the GBP/USD pair. Although, the upticks were short-lived due to the strong US dollar, which exerted pressure on the GBP/USD pair.
GBP/USD Pair Faces Mixed Housing Market Data, US Dollar Strength Looms
The mixed housing market data in the US didn't have much impact on the GBP/USD pair. However, considering the overall fundamental situation, it appears that the US dollar is more likely to strengthen. It would be wise to wait for strong buying momentum before expecting a further recovery in the GBP/USD pair, especially with the upcoming BoE's Monetary Policy Report Hearings scheduled for Thursday.
Boosted Confidence and Market Recovery: Progress in US Debt Ceiling Negotiations and Global Risk Sentiment
US President Joe Biden and Republican leaders have conveyed their cautious optimism regarding reaching a deal to raise the US debt ceiling. This positive development has had a notable impact on investor confidence, leading to a modest recovery in the global risk sentiment. Therefore, the upbeat market could help GBP/USD pair to limit its deeper losses.
Additionally, this optimistic outlook has had a weakening effect on the safe-haven US Dollar, as investors seek higher-yielding and riskier assets. Furthermore, a slight decrease in US Treasury bond yields has further discouraged USD bulls from making aggressive bets. Overall, these factors indicate a shift in market dynamics influenced by the progress in debt ceiling negotiations and market sentiment.
GBP/USD – Technical Outlook
On Thursday, the GBP/USD currency pair is trading with a slight downward bias around the 1.2469 level. The GBP/USD movement is currently constrained as the downtrend line on the two-hour timeframe poses a significant obstacle around the 1.2500 level.
The British pound's recent dip below the 50-day exponential moving average indicates a potential decline towards the support level of 1.2450, with further downside targets at 1.2385 or 1.2365. Conversely, a break above the 1.2506 level could lead to a test of the next resistance level at 1.2545.
Notably, the RSI and MACD indicators show divergence, with RSI holding in the selling zone while MACD histogram remains above zero.
These conflicting signals suggest a cautious approach, with the recommendation to seek selling opportunities below the 1.2500 level, setting a stop loss around 1.2520 and targeting 1.2425.
Related:
* GOLD Price Analysis – May 18, 2023
JOIN LONGHORNFX TODAY
24/7 live support, lightning fast withdrawals, guaranteed safe and reliable trading platforms with a true ECN broker.