Technical Analysis

GBP/USD Price Analysis – Dec 04, 2023

By LonghornFX Technical Analysis
Dec 4, 20233 min

Daily Price Outlook

Despite the weaker US dollar and the better-than-expected UK data, the GBP/USD currency pair struggled to halt its downward trend and remained well below the 1.2700 mark during the Asian session on Monday. However, the losses in the GBP/USD pair could be short-lived as speculation that the Federal Reserve (Fed) is done with its tightening cycle exerts pressure on the US Dollar and creates a tailwind for the GBP/USD pair.

Fed Chair Powell's Cautious Remarks Ease Pressure on GBP/USD Amid Rate-Hike Speculation

It's worth noting that the markets turned cautious after Federal Reserve Chair Jerome Powell made some prudent comments on Friday. Traders are adopting a cautious stance and remaining on the sidelines ahead of the significant employment report scheduled for Friday. This report could significantly influence perceptions of the future of US interest rates.

Powell noted that it's quite evident the US monetary policy is indeed slowing down the economy, just as anticipated. The interest rate is already high enough to further dampen economic activity. Although Powell mentioned their readiness to tighten things further if necessary, a majority of people in the market believe that the time for raising rates has passed. This sentiment is exerting pressure on the US dollar overall.

Therefore, Powell's cautious remarks, hinting at a possible conclusion to the rate-hike cycle, have alleviated pressure on the GBP/USD pair.

BoE Commitment and Positive Manufacturing PMI Signal Potential Strength

Moreover, Bank of England (BoE) Governor Andrew Bailey has recently affirmed the central bank's dedication to reaching a 2% inflation target. However, he maintains a cautious stance due to inadequate progress. On a positive note, the UK's S&P Global/CIPS Manufacturing PMI climbed to 47.2 in November, exceeding the anticipated 46.6.

Therefore, Governor Bailey's commitment to the 2% inflation target and the uptick in the UK's Manufacturing PMI could potentially bolster the GBP/USD pair. This is because it instills confidence in the British economy, providing support for the pound against the US dollar.

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

GBP/USD - Technical Analysis

In the ever-evolving forex market, the GBP/USD pair has exhibited a slight retreat, currently trading at 1.26, marking a decline of 0.27%. This movement signals a cautious phase for the pair amidst the broader market dynamics.

The technical landscape for GBP/USD is framed by its pivot point at $1.2683, a crucial marker for future price action. Immediate resistance levels are delineated at $1.2765, $1.2824, and $1.2909. On the downside, the pair finds its immediate support at $1.2621, with further cushions at $1.2536 and $1.2483. These levels are pivotal in determining the pair’s short-term trajectory and will be closely monitored by traders.

The Relative Strength Index (RSI) stands at 54, hovering above the midpoint, which suggests a mildly bullish sentiment. However, it’s important to note that the pair is not in the overbought territory, leaving room for potential upward movement.

Significantly, the GBP/USD is trading above its 50-day Exponential Moving Average (EMA) of $1.2600, reinforcing the current short-term bullish trend. This positioning above the 50 EMA is typically a bullish signal, but vigilance is advised as market conditions remain fluid.

In terms of chart patterns, the GBP/USD is showing a bullish outlook above the $1.2660 level. This pattern suggests that the pair might continue its upward momentum, provided it sustains above this critical threshold.

The overall trend for the GBP/USD pair appears to be bullish, especially when it maintains above the $1.2660 mark.

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