Technical Analysis

GBP/USD Price Analysis – April 22, 2024

By LonghornFX Technical Analysis
Apr 22, 20243 min

Daily Price Outlook

Despite the bearish US dollar, the GBP/USD currency pair was unable to stop its downward rally and hit an intraday low of 1.2350 level. However, the declines were mainly driven by increasing speculations about more aggressive policy easing by the Bank of England (BoE), which undermined the GBP currency and contributed to the losses in the GBP/USD pair.

On the flip side, expectations that the Federal Reserve (Fed) will keep rates higher for longer due to ongoing US inflation could help the US dollar limit its losses and may push the GBP/USD currency pair further down. In contrast to this, reduced geopolitical tensions boost investor confidence and weaken the safe-haven dollar, which might limit losses in the GBP/USD pair.

Fed Rate Expectations and Geopolitical Developments Impact on GBP/USD Pair

On the US front, the broad-based US dollar gained traction as the Federal Reserve (Fed) will keep interest rates higher for a longer time due to ongoing inflation concerns. This initially boosted the US dollar and contributed to declines in the GBPUSD pair. Traders now think the Fed might delay rate cuts until September and expect fewer cuts this year. This cautious stance boosts US Treasury bond yields, which strengthens the US dollar. Therefore, the expectation of prolonged higher rates by the Fed initially boosted the US dollar, leading to declines in GBP/USD.

On the geopolitical front, Iran indicated it won't retaliate against Israel's limited missile strike, calming concerns of heightened tensions in the Middle East. This boosts investor confidence, leading to a weakening of the safe-haven US dollar and providing support for the GBP/USD pair.

BoE Speculation and Policy Easing Impact on GBP/USD Pair

Another factor contributing to the GBP/USD pair's losing streak is the speculation around the Bank of England (BoE) adopting more aggressive policy easing measures. However, adopting more aggressive policy easing measures typically refers to potential rate cuts or other actions aimed at stimulating the economy. These measures can include lowering interest rates or implementing quantitative easing programs to increase liquidity in the financial system.

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

GBP/USD - Technical Analysis

The GBP/USD pair has recorded a slight uptick today, increasing by 0.10% to $1.23810. This move reflects subtle shifts in market sentiment as traders navigate a critical technical landscape for the British Pound against the U.S. Dollar.

The pair is currently trading below the key pivot point set at $1.24204, which serves as a gauge for directional bias in the session. Looking upwards, immediate resistance can be found at $1.24823, followed by $1.25261 and $1.25795. These levels could serve as ceilings for price actions where sellers might regain control. On the downside, the initial support is marked at $1.23324. Should bearish pressures intensify, subsequent supports at $1.22949 and $1.22575 will be crucial to halting further declines.

The Relative Strength Index (RSI) stands at 36, suggesting that the GBP/USD pair is approaching oversold territory, which could potentially lure buyers back into the market. However, the 50-day Exponential Moving Average (EMA) at $1.24747 remains above the current price, indicating an overarching bearish bias in the medium term.

Given the current technical setup, a prudent trading strategy would involve initiating a short position if the pair rises to just below the pivotal $1.24208 mark, targeting a pullback towards $1.23433. To manage risk effectively, setting a stop loss at $1.24758 is advisable, safeguarding against potential upward swings beyond the immediate resistance.

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