GBP/USD Price Analysis – July 17, 2024
Daily Price Outlook
During the European trading session, the GBP/USD currency pair maintained its upward trend, remaining well bid around the 1.3034 level and hitting an intraday high of 1.3045.
The upward movement can be attributed to the weakening US dollar, which lost its bullish traction despite better-than-expected Retail Sales data reported by the US Census Bureau for June on Tuesday.
The decline in the US dollar was largely driven by heightened expectations of Fed rate cuts in September. Another supportive factor for the GBP/USD pair was the resilient Consumer Price Index (CPI) data reported by the UK Office for National Statistics (ONS) for June, indicating ongoing inflationary pressures in the UK that could bolster the pound against the dollar.
UK CPI Data and BoE Policy Outlook Impact on GBP/USD Pair
On the BoE front, the UK Office for National Statistics reported that June's Consumer Price Index (CPI) showed steady annual increases, with headline inflation at 2.0% and core inflation at 3.5%, excluding volatile food and energy items.
Service sector inflation remained high at 5.7%, which is concerning for BoE policymakers who are cautious about normalizing policy. Month-on-month, inflation saw a slower rise of 0.1%, in line with expectations.
This persistent CPI data suggests that the BoE may delay monetary policy tightening, reducing speculation of rate hikes starting in August. The next focal point for Pound Sterling will be the upcoming employment data, crucial for assessing trends in wage growth.
Therefore, the stubborn CPI data and potential BoE hesitation to cut rates strengthen the GBP/USD pair, as the pound gains support from anticipated continued restrictive monetary policy.
Anticipated Fed Rate Cuts and Steady US Retail Sales Likely to Boost GBP/USD Pair
On the US front, the broad-based US dollar has weakened as investors anticipate rate cuts by the Federal Reserve beginning in September. This expectation has kept US Treasury bond yields near multi-month lows, preventing the dollar from recovering from its recent three-month low.
Federal Reserve officials, including Chair Jerome Powell and San Francisco Fed President Mary Daly, have indicated that inflation is approaching their target, strengthening expectations of imminent rate cuts. This outlook has prompted traders to price in multiple rate cuts by the end of the year.
On the data front, monthly Retail Sales remained steady, matching expectations, with higher core goods sales balancing weak auto demand. May's sales were revised up to 0.3% from 0.1%. This improvement in retail sales supports the economic outlook but doesn't change firm market expectations of Fed rate cuts starting in September.
Therefore, the anticipation of Fed rate cuts and steady US retail sales, coupled with a weakened US dollar, could boost the GBP/USD pair as the pound gains strength against a softer dollar.
GBP/USD - Technical Analysis
GBP/USD is currently trading at $1.2992, displaying a slight upward bias. The 4-hour chart highlights significant price levels that traders should monitor closely. The pivot point is set at $1.3019, serving as a critical level for potential trend direction.
Immediate resistance is identified at $1.3019, followed by $1.3058 and $1.3095. These resistance levels represent potential targets if the price breaks above the pivot point, indicating a continuation of the bullish trend.
On the downside, immediate support is observed at $1.2932, with subsequent support levels at $1.2898 and $1.2858.
These levels are crucial for maintaining the current trend and could act as buffers against any sharp declines. The Relative Strength Index (RSI) is at 69, indicating that the market is nearing overbought territory but still showing signs of strong buying interest.
The 50-day Exponential Moving Average (EMA) is positioned at $1.2883, which aligns with the immediate support level, providing additional strength to the current price trend. This EMA acts as a significant indicator of the underlying trend and helps identify potential reversal points.
In conclusion, the outlook for GBP/USD remains bullish above the pivot point of $1.3019. Traders are advised to buy above $1.29678, with an entry price at this level, aiming for a take profit at $1.30193 and setting a stop loss at $1.29416.
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