GBP/USD Price Analysis – Dec 11, 2023

Daily Price Outlook

During the Asian session on Monday, the GBP/USD currency pair maintained its upward rally, holding a strong position around 1.2551 level. Despite the ongoing strength of the US dollar, the GBP/USD pair showed strong recovery and gained its lost ground. However, this could be attributed to market expectations that the Bank of England (BoE) is poised to maintain borrowing costs at a 15-year high during its upcoming December meeting scheduled for Thursday. Hence, the probability of the BoE sustaining a 15-year high borrowing cost in December could bolster the GBP/USD pair.

Moving on, traders are now anticipating key events from both the FOMC and BoE meetings scheduled for this week. These impending events have the potential to induce market volatility.

Bank of England's Cautious Stance and Market Impact Ahead of December Meeting

It's worth noting that the Bank of England (BoE) is expected to maintain its borrowing costs at a 15-year high during its December meeting this Thursday. BoE governor Andrew Bailey highlighted last month that it's too early to consider rate cuts. Despite a dip in the Consumer Price Index from 6.7% in September to 4.6% in October, Bailey warned against complacency on inflation. Thus, the upcoming decision suggests the BoE's cautious approach, possibly impacting the market.

Investors will be closely monitoring any signals regarding the economic outlook and interest rates, factors that could influence the GBP/USD pair in the financial landscape.

Impact of Strong US Nonfarm Payrolls on GBP/USD Pair and Market Expectations

Furthermore, the US Nonfarm Payrolls outperformed expectations in November, with 199,000 new jobs added, beating October's 150,000 additions. The Unemployment Rate also dropped to 3.7% from 3.9%, while Average Hourly Earnings held steady at a 4.0% year-on-year rate. Federal Reserve Chair Jerome Powell recently cautioned that it's still too early to confidently say they've controlled inflation.

Powell said they are ready to make policies stricter if necessary. But, because of the good economic signs in the strong Nonfarm Payrolls report, investors think the Fed might delay rate cuts in 2024. This expectation could affect how the market behaves in the next few months.

Therefore, the robust US job report is likely to strengthen the US dollar, potentially influencing the GBP/USD pair as investors reevaluate their expectations for rate cuts.

GBP/USD - Technical Analysis

The British Pound (GBP) has witnessed a slight retreat against the US Dollar (USD), with a 0.10% downtick to the 1.25367 mark, underscoring a cautious sentiment in the market. The currency pair had previously demonstrated resilience, but the current dip suggests a pause in the bullish momentum that characterized the past trading sessions.

GBP/USD now hovers just below the pivot point of $1.2371, with the currency facing immediate resistance at $1.2458. A breach above could see it challenge the subsequent ceilings at $1.2592 and $1.2684. However, the pair is cushioned by support levels at $1.2236, with further downside protection at $1.2102 and $1.1972, which may offer buy-on-dips opportunities.

The Relative Strength Index (RSI) lingers at 33, teetering on the edge of oversold territory, which may signal an impending reversal or a consolidation phase. The Moving Average Convergence Divergence (MACD) hovers at -0.00025, slightly below the signal line at -0.00207, indicating a bearish sentiment that could suggest further pullbacks.

The 50-Day Exponential Moving Average (EMA) currently at $1.2556 serves as a key benchmark. The GBP/USD's position below this moving average is indicative of a potential short-term bearish trend, requiring close observation for a confirmed direction.

An upward channel breakout point at $1.2600 was identified, suggesting a shift towards a downtrend. Should the price remain below this key level, it could confirm the bearish outlook.

In conclusion, while the short-term trend for GBP/USD appears bearish below the $1.2565 threshold, the currency pair is at a critical juncture. Market participants may anticipate a test of resistance levels if the Pound gains momentum or a reinforcement of support levels should the current bearish pressure persist.

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