GBP/USD Price Analysis – Sep 11, 2024
Daily Price Outlook
Despite weaker-than-expected UK economic data, the GBP/USD pair continued its upward momentum, holding steady around 1.3082 for the second day in a row on Wednesday.
The main driver behind this strength was a weakening US dollar, which has been under pressure from expectations of a dovish stance from the Federal Reserve.
Traders are adopting a cautious approach, choosing to stay on the sidelines and wait for the upcoming US consumer inflation figures before making any bold moves.
UK Economic Stagnation and Production Decline Raise Concerns for GBP Amid BoE Rate Cut Expectations
On the BOE front, the UK Office for National Statistics revealed that economic growth was stagnant in July, failing to meet expectations of a modest 0.2% increase. This marks the second consecutive month of flat growth.
Meanwhile, both UK Industrial and Manufacturing Production dropped unexpectedly during this period.
The slowdown in wage growth in the UK has further increased expectations for additional interest rate cuts by the Bank of England (BoE).
These disappointing figures put pressure on the British Pound (GBP) as investors anticipate that the BoE might lower rates to boost the economy. The combination of flat growth and shrinking production suggests a struggling economy, leading to a more cautious outlook for the GBP.
US Dollar Weakens Amid Dovish Fed Expectations; Upcoming CPI Report to Impact GBP/USD Performance
On the US front, the broad-based US dollar has experienced some selling after a three-day winning streak, partly due to expectations of a dovish Federal Reserve.
This shift provides support to the GBP/USD pair, helping it hold above 1.3110. Traders are currently cautious, opting to wait for the upcoming US consumer inflation figures before making any significant moves.
The US Consumer Price Index (CPI) report, set to be released soon, will be crucial in shaping market expectations for the Federal Reserve's decision on interest rates at their next meeting on September 17-18.
On the data front, the August US Consumer Price Index (CPI) is expected to rise by 0.2%, with the annual rate projected to slow from 2.9% to 2.6%, its lowest level since 2021.
The core CPI, which excludes food and energy, is also anticipated to increase by 0.2%, maintaining a year-over-year rate of 3.2%.
This report is likely to impact the demand for the US dollar and influence the performance of the GBP/USD pair.
GBP/USD- Technical Analysis
The GBP/USD pair is trading higher at $1.31025, marking a 0.22% gain on the day as sterling continues to benefit from positive sentiment surrounding the UK economy.
The currency pair has been trading above key support levels, reflecting cautious optimism ahead of key economic data releases later in the week.
Key technical levels reveal immediate resistance at $1.3101, with the next barrier at $1.3127. Should bullish momentum persist, the pair could push towards $1.3170, representing a significant psychological resistance level.
On the downside, immediate support is located at $1.3012, with further support at $1.2976 and $1.2941, which could trigger bearish momentum if breached.
Technical indicators are pointing to a neutral-to-bullish outlook. The Relative Strength Index (RSI) is at 53, signaling that the market is neither overbought nor oversold, leaving room for further gains.
Meanwhile, the 50-day EMA sits at $1.3120, just above current price action, indicating that a break above this moving average could confirm a more sustained upward trend.
From a strategic perspective, traders may look to buy above $1.30726, targeting the pivot point at $1.31279 for potential profits. A stop-loss at $1.30435 is advised to mitigate downside risks, particularly if the pair retraces towards its support levels.
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