Technical Analysis

GBP/USD Price Analysis – April 29, 2024

By LonghornFX Technical Analysis
Apr 29, 20243 min

Daily Price Outlook

During the European trading session, the GBP/USD currency pair has been maintaining a positive trend and remained well bid around 1.2538, hitting the intraday high of 1.2549 level. However, the reason for its upward rally can be attributed to the weaker US Dollar, which lost its traction on the back of risk-on market sentiment. Investors are closely eyeing the upcoming Federal Open Market Committee (FOMC) interest rate decision and press conference scheduled for Wednesday.

Although, the losses in the US dollar could be short-lived as the US Federal Reserve (Fed) is widely expected to maintain the interest rate within its current range of 0.25%–0.5% during this week's meeting. Despite the strength of the US economy and the recent uptick in inflation, speculations suggest that the first rate cut might not occur until September.

US Dollar Weakness and Fed's Hawkish Stance:

Despite the Federal Reserve's hawkish stance on interest rates, the US Dollar is witnessing a decline and remains subdued amid positive market sentiment. Investors anticipate the Fed to maintain rates steady between 5.25% and 5.5%. Although the US economy exhibits strength, concerns over rising inflation have delayed expectations for rate cuts until September. Recent data from the US Bureau of Economic Analysis, showing a higher-than-expected increase in the Core PCE Price Index, further bolstered the Fed's hawkish expectations.

On the data front, the US Bureau of Economic Analysis reported on Friday that the Personal Consumption Expenditures (PCE) Price Index rose 0.3% in March, exceeding expectations for a reading of 2.6%. The yearly rate also climbed to 2.7% from 2.5% in February. Meanwhile, the core PCE Price Index, which excludes volatile food and energy prices, remained steady at 2.8%, higher than the anticipated 2.6%. These results reinforced the Federal Reserve's hawkish expectations and helps US dollar to limit its losses.

BoE Expected Rate Cuts and Impact on GBP/USD:

On the UK front, investors are starting to believe that the Bank of England (BoE) might lower interest rates at its June meeting. BoE Governor Andrew Bailey hinted that two or three rate cuts this year could happen, which made people think this way. If the BoE decides to cut rates, it could make the Pound Sterling weaker. However, the dovish shift in BoE's monetary policy stance could weaken the Pound Sterling (GBP) and cap further gains in the GBP/USD pair.

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

GBP/USD - Technical Analysis

In today’s trading session, the GBP/USD pair has appreciated notably, climbing by 0.43% to reach a current level of 1.25423. This movement places the currency pair just above a pivotal technical juncture observed on the 4-hour chart.

The pivot point for today is established at 1.25151. Holding above this level could serve as a springboard for GBP/USD, targeting the first immediate resistance at 1.25795. Should bullish momentum persist, further resistances are projected at 1.26377 and 1.27034, respectively. On the flip side, should the pair lose ground, it would first encounter support at 1.24498, with more substantial floors awaiting at 1.23929 and 1.23369 if the downtrend accelerates.

The technical indicators suggest a solidifying bullish bias; the Relative Strength Index (RSI) stands at 63, indicating growing momentum but still shy of the overbought territory. Furthermore, the 50-Day Exponential Moving Average (EMA) at 1.2470 now acts as a support level, reinforcing the upward trajectory since it resides below the current price.

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