Technical Analysis

GBP/USD Price Analysis – Oct 25, 2023

By LonghornFX Technical Analysis
Oct 25, 20233 min

Daily Price Outlook

Despite expectations that the Bank of England (BoE) would likely maintain steady interest rates in November, the GBP/USD currency pair managed to remain stable and even saw a slight upward movement during the European session on Wednesday. However, this upward rally can be primarily attributed to the weakening US dollar, which is influenced by factors such as declining US Treasury bond yields and a generally positive risk sentiment. Ultimately, this provided some support for the GBP/USD pair.

It's important to highlight that the US Dollar has failed to halt its downward trend and continues to remain bearish. This trend may be attributed to the decline in US Treasury bond yields. Additionally, the weakness of the US Dollar can be linked to the prevailing positive risk sentiment. However, it's noteworthy that the US economy remains robust despite the rising interest rates. This suggests that the Federal Reserve is likely to persist with its plan to raise rates as a measure to control inflation.

GBP/USD Prospects and Market Focus for the Week

On the other hand, the UK's Purchasing Managers' Index (PMI) has remained in a contraction phase for three consecutive months. This has led to speculation that the Bank of England (BoE) may not make any policy changes in November.Consequently, traders appear to be hesitant to take strong positions or make aggressive bets.

Looking ahead, no major economic news is expected from the UK. In the US, the spotlight will be on the release of New Home Sales figures. Investors will closely monitor a speech by Fed Chair Jerome Powell later in the US trading session. Also, keep an eye on the US Core PCE Price Index, which is the Fed's preferred way to measure inflation, set to be released on Friday. It will be a key focus for the market.

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

GBP/USD - Technical Analysis

On October 25, GBP/USD displayed a nominal upward adjustment, with a 0.11% increase, pegging its current price at 1.21743. Delving into its 4-hour chart, the pair's trajectory paints a nuanced story. The pivot point for GBP/USD is marked at 1.2159, a figure that holds paramount importance for traders.

In the realm of resistance, GBP/USD confronts its first hurdle at 1.2225. Further headwinds might arise at 1.2288, and should bullish momentum persist, 1.2357 could be the next target. Conversely, if the pair encounters downward pressure, immediate support has established itself at 1.2096, followed by subsequent safety nets at 1.2030 and 1.1965.

The Relative Strength Index (RSI) reads 48, signaling a neutral-to-bearish sentiment, hovering just below the midline. The MACD, interestingly, stands at a flat 0.00, with its signal line marginally higher at 0.0003400, suggesting a lack of strong momentum in either direction. Moreover, the GBP/USD rate slightly trails its 50-Day Exponential Moving Average (EMA) at 1.2185, hinting at a delicate bearish undertone in the short term.

Conclusion: The GBP/USD's broader sentiment leans bearish, especially if it descends below the 1.2170 threshold. As traders and investors dissect the intricate balance between resistance and support levels, the immediate resistance of 1.2225 becomes a focal point in the short-term forecast.

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