Technical Analysis

GBP/USD Price Analysis – Nov 13, 2023

By LonghornFX Technical Analysis
Nov 13, 20234 min

Daily Price Outlook

During the European session on Monday, the GBP/USD currency pair maintained its upward momentum and trading steadily bullish around 1.2230 marks. However, the bullish performance was fueled by the release of better-than-expected preliminary Gross Domestic Product (GDP) figures from the United Kingdom on the preceding Friday. This economic data provided a strong boost for the British Pound and contributed to the GBP/USD pair gains.

In the meantime, the upbeat economic indicators from the UK suggested a healthier economic outlook, contributing to the positive sentiment surrounding the cable currency. As we know that investors typically respond favorably to strong economic data as it implies increased economic activity and potential for higher returns on investments denominated in the currency.

Furthermore, the weakness in the US dollar played a major role in supporting the GBP/USD pair's upward trajectory. However, the declining value of the USD can be attributed to various factors, such as concerns about the US economic recovery, uncertainties in global markets, or shifts in monetary policy expectations.

UK Economy Holds Steady in Q3, Posing Stagflation Challenges

It is worth noting that the UK's economy remained sluggish in the third quarter, with zero growth, which is slightly better than the anticipated 0.1% contraction. On an annual basis, the growth stood at 0.6%, just below the expected 0.5%. Hence, this news has the potential to bolster confidence in the Pound Sterling.

Despite the data indicating that the UK has managed to avoid a recession in 2023, the situation is delicate. However, the country is facing a tough situation called stagflation, where both prices are going up a lot and many people are struggling to find jobs. It's a tough time for the economy to stay stable.

Therefore, the UK's slow-growing economy might make the Pound Sterling weaker. In the meantime, the worries about stagflation could also make things more unpredictable. This could put pressure on the GBP/USD pair, possibly causing it to go down due to uncertainty about the UK's economy.

Powell's Cautious Stance and Consumer Sentiment Drop Impact Economic Outlook

Furthermore, Federal Reserve Chair Jerome Powell surprised everyone in his Thursday speech by adopting a more cautious approach than anticipated. He expressed concerns that the existing strategies might not be sufficiently effective in managing inflation and achieving the desired 2.0% target. However, the focus shifted to the preliminary US Michigan Consumer Sentiment data, revealing a decline in consumer confidence from 63.8 last month to 60.4 in November. This introduced another layer of complexity to the economic landscape.

Hence, the cautious stance of Federal Reserve Chair Jerome Powell and the drop in US consumer sentiment data likely pressured the US Dollar, potentially leading to a positive impact on the GBP/USD pair.

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

GBP/USD - Technical Analysis

The GBP/USD pair is currently navigating through a delicate phase of its trading pattern, with the latest price action finding the currency hovering around 1.2231. This positioning represents a subtle increase, indicative of a cautious optimism that has infiltrated the market sentiment in the early hours.

The technical landscape reveals that GBP/USD is trading just above the 50-period EMA set at 1.22508, suggesting that the bulls have a slight edge. However, the proximity of the price to the EMA underscores a potential inflection point, which could lead to a decisive market move in either direction.

Resistance and support levels are distinctly mapped out, with immediate resistance situated at 1.23188. This is followed by further potential turning points at 1.23615 and 1.2400. Should the pair breach these levels, it could signify a strengthening of the bullish momentum that has been tentatively building up. Conversely, immediate support is established at 1.21863, and further down at 1.21526 and 1.21059. A drop below these levels might indicate a resurgence of bearish pressure, potentially steering the currency pair towards a downward trajectory.

The RSI metric stands at 47.13, placing it in neutral territory, yet leaning slightly towards the bearish domain. This reading suggests that the market is balanced with an inclination for potential downside risks.

Considering the current technical indicators and the market's positioning, the GBP/USD pair appears to be at a crossroads. The short-term outlook is cautiously optimistic, but traders are likely to remain vigilant, watching for signals that could dictate the currency pair's direction. The impending economic events and market news will undoubtedly serve as catalysts for the next significant move, with participants keenly awaiting these developments to gauge future trends.

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