Technical Analysis

GBP/USD Price Analysis – March 13, 2024

By LonghornFX Technical Analysis
Mar 13, 20243 min

Daily Price Outlook

The GBP/USD currency pair maintained its previous day's winning streak, hitting an intraday high of $1.2800 mark. The upward movement was supported by delayed BoE rate cut bets, underpinning the GBP and lending support to the GBP/USD pair. Furthermore, the bearish US dollar, pressured by increasing bets that the Federal Reserve (Fed) will begin cutting interest rates at its June policy meeting, was seen as another key factor that kept the GBP/USD pair higher.

Impact of BoE Rate Expectations on GBP/USD Pair and Market Sentiment

On the UK front, the Bank of England (BoE) is expected to maintain higher interest rates for a longer period. This anticipation provided additional support to the GBP/USD currency pair, which had already been bolstered by bets against a BoE rate cut. Essentially, investors were betting that the BoE would delay any potential rate cuts, which strengthened the GBP against the US dollar.

Hence, the expectations of prolonged higher interest rates from the Bank of England (BoE) create a positive outlook for the GBP, as it signifies confidence in the UK economy, attracting foreign investment and strengthening the currency.

Impact of Fed Expectations on GBP/USD Pair and Market Sentiment

Despite reports of higher consumer inflation, the increasing bets that the Federal Reserve (Fed) will begin cutting interest rates as early as June are putting pressure on the US dollar. Additionally, a generally positive sentiment in the market is also weighing on the US dollar's strength.

On the US front, the broad-based US Dollar remained bearish and continuously lost ground despite the warmer US CPI report. On the data front, the latest report on the US Consumer Price Index (CPI) shows a 3.2% year-over-year increase in February, slightly higher than the expected 3.1%. This indicates a slight uptick in inflation. Additionally, the annual Core CPI, which excludes volatile food and energy prices, came in at 3.8%, slightly above the anticipated 3.7%. These numbers suggest a continued upward trend in inflation, which could impact consumers' purchasing power and the overall economy.

Despite the warmer US CPI report, the GBP/USD pair maintained its bullish momentum, supported by expectations of Fed interest rate cuts and a generally positive market sentiment, which weakened the US dollar. Moving ahead, traders are cautious ahead of the highly anticipated two-day FOMC monetary policy meeting starting next Tuesday.

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

GBP/USD - Technical Analysis

The GBP/USD pair experienced a nominal decrease of 0.01%, landing at 1.27795, indicating a market teetering on the brink of directional bias. This slight movement reflects the broader market's ongoing assessment of economic data releases and geopolitical developments, impacting the Sterling against the Dollar.

The currency pair hovers just below its pivot point at 1.2781, suggesting that it is at a critical juncture. Resistance levels at 1.2824, 1.2857, and 1.2893 delineate the potential challenges ahead for bullish momentum. Conversely, immediate support is established at 1.2747, with further cushions at 1.2713 and 1.2672, marking essential levels that could influence a bearish turn if the pair dips below these markers.

The Relative Strength Index (RSI) at 47 points towards a market equilibrium, with a slight inclination towards selling pressure. Meanwhile, the 50-day Exponential Moving Average (EMA) at 1.2760 supports a cautious bullish outlook, suggesting a potential for upside movement if the pair can consolidate above this average.

Conclusion: The GBP/USD's current positioning indicates a neutral to slightly bearish trend, with an opportunity for reversal should it maintain above 1.27526. An advisable strategy would be to enter a buy position above this threshold, targeting 1.28055 for profit-taking, while placing a stop loss at 1.27207 to mitigate potential losses.

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