Technical Analysis

GBP/USD Price Analysis – April 15, 2024

By LonghornFX Technical Analysis
Apr 15, 20244 min

Daily Price Outlook

Despite the expectations of the Fed delaying rate cuts and forecasts for interest rate cuts by the Bank of England (BoE), the GBP/USD currency pair managed to stop its downward rally and turned bullish around the $1.2470 level. However, the statement by BoE policymaker Megan Greene indicating that rate cuts in the UK are unlikely due to concerns about inflation, combined with the upcoming speech by BoE's Deputy Governor Sarah Breeden at an influential summit, could instill confidence in the GBP currency.

Impact of Strong US Dollar and Geopolitical Tensions on GBP/USD Dynamics

On the US front, the broad-based US dollar is gaining positive traction and holding steady around 106.00, supported by high yields on US Treasury bonds, with 2-year and 10-year yields at 4.91% and 4.55%, respectively. It should be noted that the Federal Reserve is reconsidering its plans for monetary easing due to ongoing inflation and strong economic indicators, increasing the probability of no interest rate changes at the June meeting to 63.5%.

This shift is further backed by Federal Reserve Bank of Kansas President Lorie Logan's upcoming panel discussion at the BoJ-IMF conference and awaited US Retail Sales figures.

Another factor that has been boosting the US dollar was the recent geopolitical tensions, like the Iranian strike on Israel, which have also lifted the dollar to over five-month highs. Therefore, the strong US dollar, supported by high Treasury yields and a potential pause in Fed rate changes, alongside geopolitical tensions like the Iranian strike on Israel, has lifted the dollar, impacting GBP/USD.

Bank of England's Monetary Policy and Rate Cut Expectations

On the UK front, expectations for interest rate cuts by the Bank of England (BoE) have shifted, now anticipating a decline to around 4.75% by the end of 2024, a change from the earlier forecast of 4.5%. BoE policymaker Megan Greene highlighted that rate cuts in the UK are not imminent due to concerns about persistent inflation, contrasting with the US.

Traders are closely watching BoE's Deputy Governor Sarah Breeden's speech at the Innovate Finance Global Summit 2024 for insights. This cautious stance on rate cuts in the UK contrasts with the US's more uncertain monetary policy direction.

Therefore, the anticipation of a slower interest rate decrease by the Bank of England (BoE) to around 4.75% by 2024, coupled with concerns about persistent inflation delaying rate cuts, contrasts with the US's monetary policy. These factors can influence the GBP/USD currency pair.

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

GBP/USD - Technical Analysis

On April 15, the GBP/USD pair recorded a modest rise, closing the session up 0.14% at 1.24632. The pair is currently navigating the forex market waters with a cautious optimism, positioned just below a crucial pivot point at 1.25208. Should the pair breach this pivot, it could encounter resistance levels at 1.26795, 1.27828, and 1.28964. These levels represent significant thresholds that could impede upward movement, but also signal potential entry points for bullish traders.

On the downside, immediate support lies at 1.23731. Further dips could be cushioned by support at 1.23060 and more critically at 1.21924. These supports are crucial in preventing a steeper decline and offer strategic points for stop-loss settings in trading scenarios.

The technical indicators suggest a nuanced outlook: while the Relative Strength Index (RSI) details were not provided, the positioning of the 50-day Exponential Moving Average (EMA) at 1.26381 slightly above the current price hints at underlying bearish pressures. However, if the GBP/USD can sustain above its current levels, particularly if it stays above the strategically set entry price of 1.24606, the forecast is inclined towards a bullish bias. Traders might consider a buying strategy with a target at 1.25500 and a stop loss at 1.24165 to manage risk.

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