GBP/USD Price Analysis – Oct 09, 2024
Daily Price Outlook
During the European trading session, the GBP/USD currency pair continued its downward trend, trading under pressure around the 1.3090 level and reaching an intra-day low of 1.3056. This decline can largely be attributed to growing market speculation that the Bank of England (BoE) is likely to accelerate its rate-cutting cycle.
This sentiment was bolstered by dovish comments from BoE Governor Andrew Bailey last week, who suggested that the central bank might adopt a more aggressive approach to rate cuts if favorable inflation data emerges. These remarks have been a significant factor exerting downward pressure on the GBP/USD pair.
Conversely, the US Dollar (USD) remains strong, hovering near a seven-week high reached last week, fueled by reduced expectations for aggressive policy easing by the Federal Reserve (Fed). This dynamic has further contributed to the downward movement of the GBP/USD pair.
Challenges for the British Pound Amid BoE Rate-Cutting Expectations
On the BoE front, the British Pound (GBP) is facing challenges as market expectations grow that the Bank of England (BoE) may speed up its rate-cutting cycle. This shift in sentiment follows dovish comments from BoE Governor Andrew Bailey last week. He indicated that the central bank might take a more aggressive approach to cutting rates if there is positive news on inflation. As a result, many traders are betting on the possibility of lower interest rates in the UK.
These developments are putting downward pressure on the GBP/USD currency pair. Investors are concerned that a rate cut could weaken the pound further, leading to increased selling. As the market reacts to these expectations, the GBP continues to struggle against the US Dollar, which remains strong due to diminishing chances of aggressive policy easing from the Federal Reserve. This combination of factors is contributing to the pound's relative underperformance in the currency markets.
US Dollar Strength and its Impact on GBP/USD Outlook
On the US front, the US Dollar (USD) is performing well, sitting close to a seven-week high reached last week. This strength is driven by decreasing expectations for aggressive policy easing by the Federal Reserve (Fed). Currently, markets believe there is over an 85% chance that the Fed will lower interest rates by 25 basis points (bps) in November.
Besides this, rising geopolitical tensions in the Middle East and disappointing news regarding China's economic stimulus are supporting the dollar. These factors are contributing to a negative outlook for the GBP/USD pair.
Given this situation, the most likely direction for the GBP/USD is downward. However, bearish traders may hold back on making significant bets until they see the release of the FOMC meeting minutes later today.
Furthermore, key reports such as the US Consumer Price Index (CPI) and the Producer Price Index (PPI), scheduled for Thursday and Friday, will also affect USD price movements. These reports could play a crucial role in determining the next significant shift in the GBP/USD pair's direction.
GBP/USD - Technical Analysis
The British Pound (GBP/USD) is trading lower at $1.30776, down 0.21% on the day, as bearish sentiment prevails. On the 4-hour chart, the pair is currently hovering below the pivot point at $1.31065, indicating selling pressure. Immediate resistance is located at $1.31345, followed by $1.31666 and $1.31972, suggesting that the pair needs to clear these levels to signal a potential bullish reversal.
On the downside, immediate support is found at $1.30595, with further levels at $1.30320 and $1.30021 providing additional protection. A drop below these levels could increase downside momentum. The 50-day Exponential Moving Average (EMA) at $1.31060 is positioned close to the pivot point, acting as a strong resistance. The Relative Strength Index (RSI) stands at 41, which is approaching oversold territory but remains neutral.
Given the current market structure, traders might consider a buying opportunity above $1.30588, targeting the pivot point at $1.31065 with a stop-loss set below $1.30310. However, failing to hold above $1.30595 could lead to further selling pressure, pushing the pair toward $1.30320. For a potential bullish reversal, GBP/USD would need to sustain a move above $1.31065, which could open the path toward $1.31345 and beyond.
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