Technical Analysis

GBP/USD Price Analysis – July 03, 2024

By LonghornFX Technical Analysis
Jul 3, 20244 min

Daily Price Outlook

During the European trading session, the GBP/USD currency pair has maintained its upward trend and drew further bid around $1.2698 level. However, the bullish performance can be attributed to several factors.

Firstly, Federal Reserve Chair Jerome Powell's recent comments indicated increased confidence that the disinflation process has resumed. This has fueled speculation that the Fed might cut interest rates as early as September, weakening the US Dollar and bolstering the Pound Sterling against it.

Secondly, the Bank of England (BoE) has maintained a cautious stance on interest rates despite concerns about stubborn inflation in the UK's service sector. This relative stability in BoE policy contrasts with potential easing by the Fed, further supporting the GBP/USD pair's upward momentum.

Impact of UK Elections on GBP/USD Pair

On the UK front, the upcoming UK elections scheduled for Thursday are expected to be a major catalyst for the Pound Sterling (GBP). The market sentiment surrounding these elections plays a crucial role in shaping GBP/USD pair.

Analysts anticipate that a potential victory for the Labour Party could lead to a shift towards more expansionary fiscal policies. Such policies could bolster economic activity and potentially increase inflationary pressures in the UK, thereby supporting the Pound.

Conversely, a different election outcome, such as a continued Conservative Party leadership under Prime Minister Rishi Sunak, introduce policy continuity but could also bring uncertainties depending on their economic strategy post-election.

Therefore, the UK elections could significantly impact the GBP/USD pair as Labour Party victory might lead to expansionary fiscal policies, boosting GBP with economic activity, while Conservative continuity could bring stability amid potential uncertainties.

Impact of Powell's Comments on GBP/USD Pair

On the US front, Fed Chair Jerome Powell's remarks on disinflation and the potential for rate cuts have directly impacted the GBP/USD pair.

Powell's expressed confidence in the resumption of disinflationary trends, coupled with a cautious stance on immediate rate cuts pending further data, has softened the US Dollar. This stance has been interpreted by markets as dovish, reinforcing expectations of monetary easing by the Fed in the near term.

In contrast, the uncertainty surrounding US economic indicators such as the ADP Employment Change and the ISM Services PMI, both due this week, adds to the volatility in the USD. This environment favors the Pound Sterling, which has capitalized on the weakened Dollar to extend its gains, approaching key resistance levels.

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

GBP/USD - Technical Analysis

The GBP/USD pair is showing slight upward momentum, trading at $1.26930, a modest gain of 0.04% for the day. The currency pair is positioned just below its pivot point of $1.27087, suggesting a cautious yet positive outlook.

Key resistance levels are identified at $1.27015, $1.27216, and $1.27481, while support levels lie at $1.26511, $1.26332, and $1.26128. These levels highlight critical points for traders to watch, as breaking above or below these thresholds could signal further directional moves.

Technical indicators provide additional insight into the market’s dynamics. The Relative Strength Index (RSI) stands at 62, indicating that the pair is approaching overbought territory but still has room for further gains before any significant selling pressure might emerge.

The 50-day Exponential Moving Average (50 EMA) at $1.26570 serves as a crucial support level, reinforcing the current bullish trend. As long as the price stays above this moving average, the pair is likely to maintain its upward trajectory.

Market participants are closely monitoring the GBP/USD for potential impacts from ongoing economic events and central bank policies.

The pair's recent movements reflect investor sentiment and economic data releases that influence the broader forex market. With the RSI near overbought conditions and the 50 EMA providing support, traders should be cautious yet optimistic, setting entry points above key support levels and targeting gains at resistance points.

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