GBP/USD Price Analysis – Nov 06, 2024
Daily Price Outlook
During Asian trading hours on Wednesday, the GBP/USD pair continued its downward trend, turning bearish at the 1.2889 level and reaching an intra-day low of 1.2846. This depreciation was mainly driven by a surge in the US Dollar after Donald Trump claimed victory in the 2024 presidential election, with Republicans poised to take control of both the Senate and the House.
On the GBP front, the Bank of England’s upcoming rate decision, scheduled for Thursday, is expected to result in a quarter-point reduction. The BoE’s Monetary Policy Committee is likely to vote 7-2 in favor of lowering the main reference rate to 4.75% from the current 5.0%. As a result, the anticipated rate cut is expected to weigh on the GBP, as lower interest rates generally reduce the currency’s appeal to investors.
Trump’s Victory and Fed Rate Cut Expectations Drive Bearish Momentum in GBP/USD
On the US front, the broad-based US dollar sustained its upward trend and gained further momentum after Donald Trump claimed victory in the 2024 presidential election. Although the election is not officially decided yet, Trump declared himself the winner, stating that his victory gives him a strong mandate to push forward his economic policies.
Trump won key battleground states like North Carolina, Georgia, and Pennsylvania, and Fox News has already called him the winner over Democrat Kamala Harris.
Alongside Trump's win, the Republican Party is also set to take control of the Senate and is likely to win the House of Representatives.
This Republican sweep in Congress will make it easier for Trump to implement his policies, which are expected to be more inflationary, especially given his protectionist stance on trade and immigration.
The US dollar and Treasury yields surged on the news of Trump’s victory, with the greenback reaching a near four-month high.
However, the quick conclusion to the election also reduces uncertainty in the stock market, which had faced turmoil following the 2020 election.
Meanwhile, traders are awaiting the Federal Reserve’s decision on interest rates, with strong expectations for a 25 basis point cut on Thursday.
Therefore, the US dollar's strength, driven by Trump's victory and Republican control, likely pressures the GBP/USD pair, as the greenback gains momentum. Additionally, expectations of a Fed rate cut add further downward pressure on the GBP, amplifying the pair’s bearish trend.
GBP/USD – Technical Analysis
The British pound is under pressure against the U.S. dollar, with GBP/USD dropping to $1.28510, reflecting a 1.45% decline on the day. The pair has slipped below key support levels, signaling a bearish outlook as the dollar strengthens.
The immediate support now stands at $1.28134, with further downside targets at $1.27817 if selling momentum continues. On the upside, resistance sits at $1.29125, with additional resistance levels at $1.29524 (pivot) and $1.29950.
A break above these levels would be necessary to ease the bearish tone, though current indicators suggest that the pound is likely to remain under pressure in the near term.
Technical indicators paint a bearish picture, with the 50-day EMA positioned at $1.29512, well above the current price. This moving average underscores the downward trend and suggests limited upside potential for the pound unless it can reclaim levels above $1.29524.
The RSI stands at 31, edging close to oversold territory. Although this level could suggest a short-term bounce, the broader trend remains bearish, particularly as dollar strength persists.
For traders, a short position below the pivot of $1.29118 may be prudent, with a take-profit target near $1.28273 and a stop loss at $1.29526. With the pound struggling to find traction, maintaining positions below key levels aligns with current market sentiment.
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