GBP/USD Price Analysis – Oct 16, 2023

Daily Price Outlook

Despite the dovish stance of the Bank of England (BoE) regarding future interest rate hikes, the GBP/USD currency pair has been performing well today, with an increase of 0.30%, trading in the range of 1.2175 to 1.2180. Notably, this positive change comes after two consecutive days of losses. However, the reason behind this uptrend can be attributed to a weakening of the US dollar, driven by uncertainty surrounding potential interest rate hikes by the Federal Reserve. Besides this, investor confidence has grown due to risk-on-market sentiment, which is putting further pressure on the US dollar.

Factors Impacting GBP/USD and the Weaker US Dollar

The broad-based US dollar is beginning the week on a weaker note due to uncertainties surrounding the Federal Reserve's potential interest rate hikes. This uncertainty bodes well for the GBP/USD pair. It should be noted that the several Federal Reserve officials have recently indicated that they may not raise rates in November. This, coupled with the positive sentiment in the stock market, is lowering the attractiveness of the US dollar.

Nevertheless, last week, the US data release indicating a rise in consumer prices prompted some individuals to speculate that the Federal Reserve might raise interest rates by year-end. This development has driven up interest rates on US Treasury bonds, which is beneficial for the dollar.

Furthermore, the ongoing battle between Israel and Hamas, have led some to seek the safety of the dollar for their investments. This ws seen as one of the key factor that may help the US dollar to limit its deeper losses. Lastly, the expectation that the Bank of England will maintain its existing policies in November was seen as another key factor that acting as a barrier, preventing the GBP/USD pair from making more significant gains.

GBP/USD Outlook and Key Factors to Monitor

Furthermore, the Bank of England (BoE) surprised everyone by refraining from raising interest rates in September and providing no clear signals about when they might do so. Therefore, investors must patiently await a strong buying interest in the GBP/USD pair before concluding whether the recent decline from the mid-1.2300s has come to an end. On Monday, there are no significant economic data releases in the UK, but the US will be releasing the Empire State Manufacturing Index.

Notably, the speeches from influential Federal Reserve (FOMC) members will be in spotlight in order to gain insights into the future actions of the US central bank. Furthermore, the performance of US bond yields and the overall market sentiment will play a major role in determining the demand for the US dollar, affecting the GBP/USD pair later in the day.

GBP/USD - Technical Analysis

On October 16, the GBP/USD currency pair observed a modest uptick, registering a price of 1.21614, reflecting a gain of approximately 0.15% during the Asian trading window. This movement has been captured over a 4-hour chart timeframe, presenting critical data and inferences.

An essential metric, the pivot point, is identified at 1.22047 for the GBP/USD pair. On the upside, potential resistance levels are established at 1.22815, followed by a stronger resistance at 1.24174, culminating at the significant 1.24971. Conversely, should the pair experience downward traction, the immediate support to be mindful of stands at 1.20658. Subsequent layers of support solidify at 1.1989 and deepen further at 1.18532.

Shifting focus to key technical indicators, the Relative Strength Index (RSI) for the GBP/USD is valued at 40. While this doesn't immediately indicate overbought or oversold conditions, it's verging on a bearish sentiment. The Moving Average Convergence Divergence (MACD) reveals a value of -0.0014, with its signal line positioned at -0.0021. This formation suggests that the MACD line resides above the signal line, potentially hinting at an upcoming bullish momentum. Meanwhile, the 50-Day Exponential Moving Average (EMA) is calculated at 1.22131. Since the current GBP/USD price is slightly below this EMA, it points towards a short-term bearish sentiment.

In conclusion, the 50 EMA coupled with the recently breached upward channel is now establishing resistance at 1.2228. This resistance level holds significance and is one traders and investors might want to keep an eye on for future movements.

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