Technical Analysis

GBP/USD Price Analysis – Jan 10, 2024

By LonghornFX Technical Analysis
Jan 10, 20244 min

Daily Price Outlook

The GBP/USD currency pair maintained its upward trend and remained well bid above the $1.2724 level. The reason for its upward trend can be attributed to the improved market sentiment, driven by comments from Federal Reserve (Fed) members speculating about potential rate cuts by the end of 2024, contributing to a weaker US Dollar. Furthermore, the BoE is sticking to its plan for more interest rate hikes, even though indicators like inflation and wage growth are slowing down. This was seen as another key factor that kept the GBP/USD pair higher.

Monetary Policy Divergence Boosts GBP/USD: BoE Signals Hikes, Fed Hints at Cuts

It is worth noting that the US Dollar Index (DXY) is hovering around 102.50, aiming for more gains due to improved US Treasury yields. The 2-year and 10-year yields stand at 4.36% and 4.02%, respectively. Despite this, the US Dollar is under pressure from a risk-on sentiment sparked by hints from Federal Reserve members about potential interest rate cuts by late 2024. Atlanta Fed President Bostic suggests two cuts, citing a larger-than-expected decline in inflation. Fed Governor Bowman notes the current policy is somewhat restrictive but may need a rate cut if inflation drifts away from the 2% target. The GBP/USD pair is strengthening due to differences in monetary policies between the Bank of England and the US Federal Reserve. The BoE leans towards further rate hikes, while expectations grow for the Fed to start easing in March.

Therefore, the GBP/USD pair is gaining strength as the Bank of England signals more rate hikes, while the US Federal Reserve hints at potential rate cuts. This monetary policy divergence is boosting the GBP/USD pair.

Market Uncertainty Escalates: Divergent Views on Interest Rates and Inflation Risks

Moreover, DeAnne Julius, a former Bank of England (BoE) monetary policy committee member, disagrees on interest rates, stating the BoE won't cut rates in 2024. She also warns of potential inflation from rising tensions in the Middle East, leading to higher energy prices. BoE Governor Andrew Bailey speaks on Wednesday. UK Manufacturing Production data, expected to show growth in November, is due on Friday. In the US, December's Consumer Price Index (CPI) data releases on Thursday. These factors add uncertainty, influencing the market as it awaits economic updates and responds to differing views on interest rates and potential inflation shocks.

Therefore, DeAnne Julius's divergence on BoE's interest rates and warnings of potential inflation from Middle East tensions add uncertainty. This, coupled with upcoming economic data will influence the GBP/USD pair.

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

GBP/USD - Technical Analysis

As we delve into the GBP/USD pair's performance on January 10th, it's evident that the currency pair is navigating a delicate balance in the forex markets. Currently trading at 1.2699, it exhibits a slight downtrend with a 0.07% decrease. This modest change underlines the currency pair's ongoing struggle to find a definitive direction amidst varied market forces.

Analyzing the key price levels, the GBP/USD pair finds its pivot point at 1.2697. Looking upwards, the immediate resistance is set at 1.2790, followed by further resistance levels at 1.2861 and 1.2951. These points may act as barriers to the pair’s upward movement. On the downside, support is established at 1.2629, with additional levels at 1.2539 and 1.2471, offering potential stability in the event of a further decline.

The technical indicators paint a nuanced picture of GBP/USD's current market sentiment. The Relative Strength Index (RSI) stands at 47, indicating a slightly bearish sentiment as it is just below the neutral 50 mark. The Moving Average Convergence Divergence (MACD) presents a value of -0.00029 against a signal line of 0.00063, suggesting a potential downward momentum for the currency pair. The 50-Day Exponential Moving Average (EMA) at 1.2716 is marginally above the current price, further hinting at a short-term bearish trend.

In conclusion, the short-term outlook for GBP/USD appears to be neutral to slightly bearish. Traders might consider a sell stop strategy at 1.26859, aiming for a take profit at 1.26496, while placing a stop loss at 1.27195.

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