GBP/USD Price Analysis – Aug 19, 2024
Daily Price Outlook
During the European trading session, the EUR/USD currency pair maintained its upward rally and surged to its year-to-date (YTD) highs, hovering around 1.1040.
This rise was fueled by a weakening US Dollar (USD) amid increasing expectations of a Federal Reserve rate cut in September.
Market participants are closely watching Fed Chair Jerome Powell's upcoming speech on Friday for additional insights into the potential interest rate cuts.
The dovish remarks from Fed officials have exerted selling pressure on the USD, further supporting the EUR/USD pair's upward momentum.
EUR/USD Gains Amidst Fed Rate Cut Speculations and ECB Policy Outlook
On the US front, the broad-based US dollar continues to face pressure as traders increasingly bet on a rate cut at the next Fed meeting.
San Francisco Fed President Mary Daly's recent comments highlighted her confidence that inflation is under control, suggesting it might be time to consider adjusting borrowing costs.
Meanwhile, Chicago Fed President Austan Goolsbee echoed similar sentiments, cautioning against maintaining restrictive policies longer than necessary.
These dovish signals have led investors to price in a 70% probability of a quarter-point rate cut in September, with some even expecting a half-point reduction. This environment has created a supportive backdrop for the EUR/USD pair.
Impact of ECB Rate Path Expectations on EUR/USD
Across the Atlantic, the Euro (EUR) is gaining ground as the European Central Bank (ECB) is expected to reduce interest rates gradually. ECB President Christine Lagarde emphasized the bank's data-dependent approach, indicating that policymakers are not committed to a specific rate path.
This cautious stance by the ECB, coupled with the weakening USD, is contributing to the EUR/USD pair's strength. Investors will continue to monitor developments in the Eurozone and any updates from ECB officials that could influence the pair's trend.
GBP/USD - Technical Analysis
GBP/USD is currently trading at $1.29542, reflecting a modest increase of 0.07%. The pair is trading just below its pivot point of $1.2997, which is a crucial level to watch.
The Relative Strength Index (RSI) is at 78, indicating that the pair is in overbought territory, which could suggest that a short-term pullback might be on the horizon.
However, the overall trend remains bullish, supported by the 50-day Exponential Moving Average (EMA) at $1.2800.
Immediate resistance is found at $1.2978, followed by more substantial resistance levels at $1.3034 and $1.3082.
On the downside, the first level of support is at $1.2886, with further support at $1.2846 and $1.2803. If GBP/USD can break above the pivot point, it may trigger further gains towards the higher resistance levels.
For those looking to trade this pair, a buy entry above $1.29351 with a take profit target at $1.29965 could be a strategic move.
A stop loss at $1.28938 would help manage risk in case of an unexpected downturn.
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