Technical Analysis

GBP/USD Price Analysis – Oct 11, 2023

By LonghornFX Technical Analysis
Oct 11, 20233 min
Signal 2023 05 25 122627 002

Daily Price Outlook

The GBP/USD currency pair succeeded to extend its previous sixth day upward rally and reached a nearly three-week high during the early European trading hours. It is currently trading below the 1.2300 mark. However, the reason behind this upward trend is the declining appeal of the US Dollar, as bond yields in the US have been dropping, Meanwhile, the risk-on market sentiment was seen as another key factor that undermined the US dollar and contributed to the GBP.USD currency pair.

Looking ahead, investors are putting thier attention to events including the US Producer Price Index (PPI), which will likely influence the market. Meanwhile, the market is awaiting the release of the Federal Open Market Committee (FOMC) meeting minutes, which will provide some important information.

Fed Comments and Dovish Stance Impact on GBP/USD

It is worth noting that the recent comments made by Federal Reserve officials have dampened investor optimism regarding the Fed's intentions to follow an hawkish interest rate hike policy. Consequently, US Treasury bond yields have declined, which is unfavorable for the US Dollar. Therefore, the GBP/USD currency pair has been positively impacted by weaker US dollar.

Notably, Atlanta Fed President Raphael Bostic stated that the central bank doesn't need to raise interest rates further. However, this dovish stance, or cautious approach to monetary policy, is influencing market sentiment and further weakening the US Dollar. Hence, the Fed officials' comments have made investors think the Fed won't raise rates aggressively, and that's making the US Dollar less attractive. This is helping the GBP/USD currency pair.

Market Sentiment, Fed Expectations, and GBP/USD Outlook

Moreover, the positive sentiment in the market was seen as another reason why the US Dollar is struggling. Despite things are getting tense in the Middle East, investors don't seem too worried. They think the Federal Reserve will not raise interest rates. This positive view is making investors more comfortable with putting their money into riskier things like stocks and less interested in the safe-haven US Dollar.

Conversely, it is also important to understand that the market still believes the Fed could increase interest rates one more time before the year is over. That's why traders aren't completely giving up on the USD.

Looking forward, investors are keeping thier focus on two important reports, the US Producer Price Index (PPI) and the FOMC meeting minutes. Later, on Thursday, all eyes will be on the latest US consumer inflation figures. These reports could shape the currency pair's future moves.

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

GBP/USD - Technical Analysis

The GBP/USD currency pair, as presented on the 4-hour chart, is currently trading at 1.22912. The established pivot point for the pair stands at 1.21769.

On the upside, immediate resistance lies at 1.2318, followed by 1.24016 and 1.25426. On the downside, GBP/USD experiences support at 1.20933, with subsequent support levels at 1.19523 and 1.18686.

From a technical indicators standpoint, the Relative Strength Index (RSI) showcases a value of 62.51, suggesting a bullish momentum without breaching the overbought threshold.

The MACD records a slight bullish divergence with a value of 0.00074, which is below its signal line placed at 0.0034. Notably, the current price of GBP/USD is trading above the 50-day Exponential Moving Average (EMA) marked at 1.22064, reinforcing the bullish bias in the short term.

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