Daily Price Outlook
Despite the strong performance of the US dollar, the GBP/USD pair has maintained its upward trend. It has managed to consolidate its gains from Friday, reaching its highest level since September 20. Nevertheless, the rebound in US bond yields has lent some support to the USD and capping the GBP/USD's gains.
The US Dollar Index (DXY), which measures the performance of the US dollar against a basket of currencies, has bounced back from a six-week low it hit on Friday, supported by a slight increase in US Treasury bond yields. This development has created headwinds for the GBP/USD pair.
US Economic Data and Its Impact on GBP/USD
It's worth noting that the recent weaker US economic data has confirmed some previous expectations. The widely-watched US employment report showed the addition of just 150,000 jobs in October, which was below the expected 180,000. Besides this, the previously reported 336,000 jobs for the prior month was revised down to 297,000.
Moreover, the US ISM Non-Manufacturing PMI dropped to a five-month low of 51.8 in October, down from the previous reading of 53.6. These less-than-encouraging figures might discourage significant bullish positions on the US dollar, potentially providing some support to the GBP/USD pair.
GBP/USD Market Outlook and Influential Factors
Furthermore, the Bank of England's downbeat economic forecast, which suggests a potential recession in the coming year, could hamper the GBP/USD pair's upward momentum. Investors have been convinced of the probability of an interest rate cut by the UK central bank, with markets fully pricing in a 25 basis point reduction by August 2024.
Investors are currently eagerly anticipating the release of the UK Construction PMI. Furthermore, traders will be closely monitoring speeches by Fed Governor Lisa Cook and BoE Chief Economist Huw Pill for valuable market insights.
GBP/USD - Technical Analysis
As we embark upon a new trading week, the focus shifts to the British Pound (GBP) against the US Dollar (USD), a pair that continues to captivate investors' attention in the currency market.
At the core of our technical analysis are the pivot points, which stand as crucial markers for potential shifts in the market trajectory. The pivot point is placed at 1.2287, with the currency pair experiencing immediate resistance at 1.2483. Should the bulls muster enough strength, subsequent resistance levels are observed at 1.2585 and 1.2785. Conversely, immediate support is found at 1.2185, followed by stronger floors at 1.1985 and 1.1879.
Diving deeper into the technical indicators, the Relative Strength Index (RSI) stands at 73, signaling overbought conditions and suggesting a potential pullback or consolidation in the near term. Furthermore, the 50-Day Exponential Moving Average (EMA) at 1.22 provides additional context; the price positioning above the 50 EMA points to a short-term bullish trend, lending credence to the current upward momentum.
A closer examination of the chart reveals a notable pattern—an upward channel formation. This pattern typically indicates a bullish sentiment, which is further reinforced by the recent price action breaking above the upper boundary of the channel.
In conclusion, while the GBP/USD pair exhibits a bullish stance, especially above the 1.2340 mark, the overbought RSI reading warrants caution. Should the bullish momentum persist, the pair is likely to test the immediate resistance at 1.2483 in the coming days. However, traders should remain vigilant for signs of a potential reversal or consolidation, given the current overbought conditions.
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