Technical Analysis

GBP/USD Price Analysis – April 03, 2024

By LonghornFX Technical Analysis
Apr 3, 20243 min

Daily Price Outlook

The GBP/USD currency pair has been unable to break its downward trend, remaining around the 1.2565 level despite the bearish US dollar. This downward movement can be attributed to the dovish monetary policy stance of the Bank of England (BoE). Traders are increasingly betting that the BoE will cut interest rates, leading to downward pressure on the GBP.

Conversely, statements from Fed officials suggesting potential rate cuts and the decreased likelihood of a rate cut by June, as seen in the CME FedWatch Tool, have initially bolstered the US dollar. However, this positive impact was short-lived as the dollar's gains lost momentum. Despite the dollar's weakened state, the GBP/USD pair continues to show a bearish performance.

Impact of BoE's Monetary Policy Outlook on GBP/USD Pair

On the UK front, traders are increasingly betting that the Bank of England (BoE) will cut interest rates before the US Federal Reserve (Fed) does this year. This sentiment is putting downward pressure on the Pound Sterling (GBP). In the meantime, concerns about easing UK inflation and a generally downbeat market sentiment are further weighing on the GBP.

Therefore, the anticipation of a rate cut by the Bank of England, coupled with concerns about UK inflation and market sentiment, is likely to keep the GBP/USD pair under downward pressure, limiting its upward potential.

Impact of Fed's Monetary Policy Outlook on USD and GBP/USD Pair

On the US front, Fed officials discussed the monetary policy outlook recently. Cleveland Fed Bank President Loretta Mester expects interest rate cuts this year but not in May's policy meeting. Meanwhile, San Francisco Fed Bank President Mary Daly also foresees rate cuts but wants more proof of inflation cooling. She considers three rate cuts this year. Currently, investors see a 65% chance of a rate cut by June, down from 70% after March's meeting, according to the CME FedWatch Tool.

Therefore, the anticipation of potential interest rate cuts by the Fed could initially weaken the US dollar, while uncertainties surrounding inflation and rate cuts may also impact the GBP/USD pair's performance.

GBP/USD Price Chart - Source: Tradingview
GBP/USD Price Chart - Source: Tradingview

GBP/USD - Technical Analysis

On April 3, the GBP/USD pair saw a marginal gain, inching up by 0.01% to close at 1.25732. The day's trading revolved around the pivot point of 1.25840, with immediate resistance noted at 1.26432. Further resistance points are observed at 1.26744 and 1.27017, marking the upper thresholds the pair might encounter. On the downside, the initial support aligns at 1.25409, extending to 1.24779, setting the stage for potential fallbacks.

The currency pair's technical indicators reveal a mixed sentiment. The Relative Strength Index (RSI) at 47 leans towards a neutral stance, neither distinctly bullish nor bearish. The 50-day Exponential Moving Average (EMA) is positioned at 1.25966, hovering slightly above the current market price, suggesting a cautious outlook. Notably, a downward trendline presents resistance around the $1.2585 level, indicating a technical barrier.

Market behavior, particularly the formation of Doji candlesticks beneath this trendline, may signal an impending bearish trend. Therefore, a strategic entry point for traders could be selling below 1.25849, targeting a take-profit at 1.25044 while maintaining a stop-loss at 1.26256 to mitigate risk and capitalize on the anticipated downward momentum.

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