GBP/USD Price Analysis – July 22, 2024
Daily Price Outlook
During the European trading session, the GBP/USD currency pair maintained its upward trend and remained well-bid around the 1.2927 level, hitting an intra-day high of 1.2940.
The upward rally was supported by a bearish US dollar, which lost traction due to recent US political developments and rising expectations of a Federal Reserve rate-cut cycle starting in September.
On the other side, the diminishing probabilities of an August rate cut by the Bank of England have also played a significant role in underpinning the GBP/USD pair.
Looking forward, there are no major economic reports from the UK or US on Monday, so the GBP/USD pair will be influenced by changes in the US dollar. Market attention will focus on US political events, which will affect the broader risk sentiment and potentially boost the GBP/USD pair.
US Dollar Weakens on Political Shifts and Rate Cut Expectations, Boosting GBP/USD
On the US front, the broad-based US dollar starts the new week on a bearish note due to recent political developments. US President Joe Biden’s surprising decision to step down from the 2024 Presidential election raises the probability of Donald Trump becoming the next president.
This political shift, combined with expectations that the Federal Reserve might cut interest rates in September, has made investors more willing to take risks.
As a result, the US dollar, which is usually seen as a safe-haven asset, loses strength. This weakness in the dollar supports the GBP/USD pair, making the British pound stronger against the greenback.
GBP/USD Strengthens on Diminished Rate Cut Expectations and Strong UK Economic Data
On the other hand, the upticks in the GBP/USD pair are further bolstered by reduced chances of an interest rate cut by the Bank of England (BoE) in August. BoE Chief Economist Huw Pill mentioned earlier this month that more work is needed to control persistent inflation in the UK.
Meanwhile, UK consumer inflation rose by 2% year-on-year in June, slightly more than expected, following better-than-expected GDP growth of 0.4% in May. These factors have led investors to delay their expectations for a rate cut, supporting the British pound against the US dollar.
Therefore, the reduced probability of a Bank of England rate cut, combined with rising UK inflation and strong GDP growth, strengthens the GBP/USD pair by boosting investor confidence in the British pound.
GBP/USD - Technical Analysis
GBP/USD is currently trading at $1.29145, reflecting a slight increase of 0.05%. The 4-hour chart shows a pivot point at $1.2939, serving as a critical threshold for market movements.
Immediate resistance is pegged at $1.2972, with further resistance levels at $1.3010 and $1.3046. On the downside, immediate support is seen at $1.2875, followed by deeper support levels at $1.2834 and $1.2782.
The technical indicators reveal a cautious market sentiment. The Relative Strength Index (RSI) is at 39, indicating that the pair is approaching oversold territory. This could signal potential buying interest if the RSI continues to decline.
The 50-day Exponential Moving Average (EMA) stands at $1.2939, slightly above the current price, suggesting a bearish short-term outlook if the price remains below this level.
Given the technical configuration, a sell strategy is recommended below the pivot point of $1.29400.
The proposed take profit level is $1.28800, aligning with the immediate support zone, offering a target for potential downside movement. A stop loss should be set at $1.29800, just above the first resistance level, to mitigate risk against unexpected upward price shifts.
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