Daily Price Outlook
The GBP/USD currency pair stopped its two-day decline and maintained a position above the 1.2600 support level during Wednesday's European trading hours. However, the upward momentum in the pair can be attributed to the weakening of the US Dollar.
On the flip side, the upticks in the GBP/USD pair could be short-lived as the markets increase bets on an earlier start to interest rate cuts by the Bank of England (BoE). Financial markets are now almost fully priced in a first BoE rate cut by June 2024.
Therefore, the GBP/USD pair is likely to experience downward pressure as markets anticipate the possibility of earlier interest rate cuts by the Bank of England, which could have an impact on investor confidence.
U.S. Economic Indicators and Their Potential Impact on the GBP/USD Pair
It's worth noting that this week's US job openings data, measured by JOLTS, turned out worse than anticipated. Notably, the numbers dropped by 617,000 to 8.733 million in October, hitting the lowest point since March 2021. Now, the focus shifts to Wednesday's ADP job report for November, where a 130,000 increase is expected.
On a positive note, the US ISM Services PMI for November exceeded market expectations, growing from 51.8 to 52.7. The spotlight this week is on employment data, particularly the ADP Employment Change and Nonfarm Payrolls (NFP), which could provide clues about future interest rate moves.
Despite this, the market anticipates the Federal Reserve to maintain unchanged interest rates at its December meeting next week. All eyes are on these indicators as they play a crucial role in shaping expectations for the economic path ahead.
Therefore, the weaker-than-expected US job data will likely lead to a cautious market sentiment, potentially benefiting the GBP/USD pair.
Impact on GBP/USD Pair Amidst Anticipated BoE Rate Cuts
Moreover, there is a growing belief in the markets that the Bank of England (BoE) might start interest rate cuts sooner than expected. Investors are now almost fully expecting the first BoE rate cut by June 2024. This week, all eyes are on the BoE's Financial Stability Report on Wednesday.
Traders will also be closely watching the UK S&P Global/CIPS Construction PMI for November, along with the US ADP private employment and Unit Labor Cost data later on Wednesday.
GBP/USD - Technical Analysis
The British Pound finds modest fortitude against the US Dollar, with GBP/USD ticking up 0.14% to trade around the 1.26 mark. The currency pair's recent performance hints at an emerging cautious optimism among traders as they navigate the waters of global economic uncertainty.
A technical examination reveals a pivot point at 1.2537, serving as the fulcrum for the cable's short-term trajectory. Resistance is staged at 1.2623, followed by further barriers at 1.2680 and 1.2768. Should Sterling wane, it will encounter a series of supports at 1.2481, 1.2427, and critically at 1.2371, which could arrest any downward spirals.
The Relative Strength Index (RSI) lingers at 44, subtly underscoring the market's indecision, as it hovers below the bullish threshold of 50. Meanwhile, the 50-Day Exponential Moving Average (EMA) stands at 1.2619, suggesting the Pound's path may hinge upon its ability to sustain above this level.
Chart patterns have yet to disclose a definitive narrative, with the GBP/USD straddling a line of neutrality. The implication here is one of potential: a decisive stride above 1.2585 could ignite bullish fervor, whereas failure to maintain this level could see a retest of lower supports.
In sum, the Pound's current stance is one of cautious bullishness above 1.2585, with traders likely to eye resistance levels as benchmarks for the Sterling's stamina in the days ahead.
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