Technical Analysis

GBP/USD Price Analysis – April 17, 2024

By LonghornFX Technical Analysis
Apr 17, 20244 min

Daily Price Outlook

Despite the bullish US dollar, the GBP/USD currency pair has managed to stop its downward trend and has been showing a bullish trend, reaching around the $1.2430 level. However, the reason for its upward movement is the positive performance of the UK Consumer Price Index (CPI). In March, the CPI rose by 3.2%, exceeding market expectations of 3.1%. This upbeat economic indicator has bolstered confidence in the British economy, leading to increased demand for the Pound Sterling (GBP) and pushing the pair higher.

In contrast to this, the stronger US dollar and the Federal Reserve's hawkish stance on rate cuts were seen as one of the key factors that kept the lid on any additional gains in the GBP/USD pair.

Positive UK CPI Data Supports GBP/USD Pair Amid Economic Confidence

On the data front, the United Kingdom's Consumer Price Index (CPI) rose by 3.2% year-over-year in March, slightly slower than the 3.4% increase in February but beating expectations of a 3.1% rise. The Core CPI, which excludes volatile items like food and energy, grew by 4.2% annually, lower than February's 4.5% but above the anticipated 4.1%. March's Services CPI increased by 6.0% compared to the previous year, slightly down from February's 6.1% growth. Month-on-month, UK inflation stayed steady at 0.6% in March, matching February's rate. T

Therefore, the positive UK CPI data, despite a slight slowdown in growth, supported the GBP/USD pair, pushing it towards the $1.2450 level due to increased confidence in the British economy.

GBP/USD Pair Faces Downward Pressure from Hawkish Fed Comments and Strong US Retail Sales

On the other side of the pair, the broad-based US Dollar has seen upside momentum due to comments from Federal Reserve (Fed) Chair Jerome Powell. Powell's hawkish stance on monetary policy, emphasizing the need for a longer period of restrictive measures, has strengthened the US dollar. In addition to this, positive US Retail Sales data has further boosted confidence in the American economy, exerting pressure on the GBP/USD pair.

On the data front, US Building Permits dropped to 1.458 million in March, below the expected 1.514 million, while Housing Starts fell to 1.321 million, missing the anticipated 1.480 million. However, US Retail Sales rose by 0.7% in March, surpassing expectations of 0.3% and revised upwards from 0.6% in February.

Therefore, the GBP/USD pair faced downward pressure from Jerome Powell's hawkish comments and positive US Retail Sales data, strengthening the US dollar against the British pound.

Bank of England Rate Cut Expectations Impact GBP/USD Pair

On the UK front, Investors have been pricing in the possibility of two rate cuts by the Bank of England (BoE) within this year, with expectations of the first cut potentially in August or September. This anticipation has created uncertainty in the forex market, leading to some selling pressure on the Pound (GBP) and impacting the GBP/USD pair's performance.

Therefore, the expectations of rate cuts by the Bank of England have introduced uncertainty, creating selling pressure on the Pound (GBP) and influencing the performance of the GBP/USD pair.

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

GBP/USD - Technical Analysis

On April 17, the GBP/USD pair experienced a slight increase, closing at 1.24394, up by 0.10%. This modest gain suggests a tentative optimism among traders as they navigate a mix of economic signals from both the UK and the US. Currently, the pair is trading below the pivotal level of 1.2511, which acts as a key juncture for future price movements.

Immediate resistance is established at 1.2470, with subsequent levels at 1.2512 and 1.2568. A breach of these resistance points could signal a strengthening of the bullish momentum. On the downside, the pair finds initial support at 1.2375. Further declines could see the GBP/USD testing support at 1.2332 and 1.2295, potentially reinforcing a bearish trend if these levels are penetrated.

The Relative Strength Index (RSI) at 37 suggests that the currency pair is nearing oversold territory, indicating potential for an upward correction if bullish triggers are present in the market. The 50-day Exponential Moving Average (EMA) at 1.2552 also supports this view, as it lies just above the current price level, hinting at underlying buying pressure.

Given the technical setup, a prudent trading strategy would be to initiate a buy position if the GBP/USD moves above 1.24198, targeting a profit at 1.25114, while setting a stop loss at 1.23728 to manage potential downside risks.

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