Technical Analysis

GBP/USD Price Analysis – Feb 14, 2024

By LonghornFX Technical Analysis
Feb 14, 20243 min

Daily Price Outlook 

The GBP/USD currency pair was unable to stop its bearish bias and remained well-offered around the 1.2547 level. However, the reason for its downward trend can be attributed to the downbeat UK CPI data, which has strengthen BoE’s rate-cut bets and undermined the Pound Sterling, contributing to the GBP/USD pair's losses. On the other side, the increasing bets that the Federal Reserve (Fed) will keep rates higher for longer, bolstered by the stronger-than-expected US consumer inflation data on Tuesday, was seen as another key factor underpinning the GBP/USD pair by pressuring the US Dollar.

Bearish Outlook for GBP/USD Pair amid Soft UK Inflation Data and Rate Cut Expectations

As mentioned above, the GBP/USD pair has been facing a bearish bias as the United Kingdom reported softer-than-anticipated inflation data for January, with the annual headline and core Consumer Price Index (CPI) rising by 4.0% and 5.1%, respectively, but the monthly figure deflating by 0.6%. This unexpected softness in inflation, along with moderate growth in Average Earnings, is expected to force Bank of England (BoE) policymakers to consider early rate cuts.. Consequently, the Pound Sterling faces selling pressure, with the GBP/USD pair likely to remain on a negative trajectory amid softening consumer price inflation and dismal market sentiment.

The softer-than-anticipated inflation data and potential early rate cuts by the Bank of England are likely to exert selling pressure on the GBP/USD pair, keeping it on a negative trajectory.

Impact of Bullish US Dollar and Fed Rate Expectations on GBP/USD Pair

Another factor weighing on the GBP/USD pair is the bullish US dollar, supported by expectations that the Federal Reserve (Fed) will maintain higher rates for longer, driven by hotter-than-expected US consumer inflation data. According to the Bureau of Labor Statistics, the headline US Consumer Price Index (CPI) increased by 0.3% in January, softening to a year-over-year rate of 3.1% from December's 3.4%, surpassing expectations. Additionally, the Core CPI also exceeded consensus estimates. These factors combined suggest that the Fed might not feel pressured to implement rate cuts hastily.

Therefore, the bullish US dollar, backed by expectations of prolonged higher rates due to strong US consumer inflation data, further weighs on the GBP/USD pair, likely extending its negative trajectory.

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

GBP/USD - Technical Analysis

On February 14, the GBP/USD pair witnessed a modest uptick, registering a 0.09% increase to trade at 1.26046. This movement reflects a cautious optimism in the market, possibly driven by recent economic developments and policy announcements from both the Bank of England and the Federal Reserve.

The pair currently trades slightly above its pivot point at 1.25908, suggesting a tentative bullish sentiment among traders. Immediate resistance levels are identified at 1.26405, 1.26842, and 1.27301, which the GBP/USD must breach to sustain an upward trajectory. Conversely, support is closely found at 1.26015, with further safety nets at 1.25588 and 1.25209, underscoring the pair's narrow trading range.

The Relative Strength Index (RSI) stands at 46, indicating a neutral market momentum without clear signs of overbought or oversold conditions. Additionally, the 50-day Exponential Moving Average (EMA) at 1.26131 slightly surpasses the current price, providing a subtle hint towards potential resistance.

Considering the GBP/USD's proximity to critical technical levels, a cautious trading approach is advisable. A sell strategy below the pivot point at 1.25913, aiming for a take profit at 1.25469 and a stop loss at 1.26179, could capitalize on potential downward adjustments. This strategy leverages the pair's current positioning and anticipated resistance challenges, aiming for a tactical short-term gain.

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