GBP/USD Price Analysis – Sep 23, 2024
Daily Price Outlook
During the early European trading session, the GBP/USD currency pair continued its three-day losing streak, dropping to 1.3266 on Monday. This decline comes as the US Dollar sees a modest recovery, putting additional pressure on the major pair.
The Bank of England's cautious approach to interest rates, combined with steady inflation, adds to the uncertainty surrounding the pound, as traders look for clearer signals on monetary policy.
Looking ahead, all eyes will be on the flash reading of the US Purchasing Managers Index (PMI) scheduled for release later today.
A stronger-than-expected PMI could bolster the US dollar further, leading to additional selling pressure on the GBP/USD pair.
US Dollar Faces Pressure Amid Fed Rate Cut and Economic Uncertainty
Despite the rising expectations of a Fed rate cut, the broad-based US dollar has regained mild positive traction ahead of the flash reading of the US Purchasing Managers Index (PMI). Last week, the US Federal Reserve lowered its key overnight borrowing rate by half a percentage point, marking its first cut since the early days of the Covid pandemic.
The Fed's statement expressed greater confidence that inflation is moving toward its 2% target, with risks to employment and inflation goals now seen as roughly balanced.
However, Fed Chair Jerome Powell was careful not to claim victory over inflation, as pricing pressures still persist.
Looking ahead, the US Personal Consumption Expenditures (PCE) index, which is the Fed's preferred measure of inflation, is set to be released on Friday. This report may provide insights into inflation trends and the future of US interest rates.
Meanwhile, uncertainty about the US economic outlook, coupled with rising expectations of further Fed rate cuts later this year, is likely to keep pressure on the US dollar, particularly against the Pound Sterling (GBP).
Bank of England's Cautious Stance Bolsters GBP Against USD
On the other hand, Bank of England (BoE) Governor Andrew Bailey emphasized the importance of keeping inflation low. He stated that it’s crucial not to reduce interest rates too quickly or by too much to maintain stability.
In their latest monetary policy meeting, the BoE decided to hold interest rates steady at 5.0%. This decision came right after the UK reported its Consumer Price Index (CPI) inflation data, which remained unchanged at 2.2% year-over-year in August.
Bailey's cautious approach reflects the ongoing challenges in managing inflation and economic growth. By keeping interest rates steady, the BoE aims to balance the need for economic support while preventing inflation from rising.
As inflation data shows signs of stability, the central bank is carefully considering its next steps. Market participants will be watching closely for any signals from the BoE regarding future interest rate decisions, as these choices will play a significant role in shaping the UK’s economic outlook.
Therefore, the Bank of England's decision to hold rates steady and focus on inflation stability may strengthen the GBP against the USD. As market participants anticipate cautious monetary policy, the GBP/USD pair could see upward pressure if inflation remains controlled.
GBP/USD - Technical Analysis
The GBP/USD pair is currently trading at $1.33131, down by 0.05% as the pound faces modest pressure amidst a subdued market environment. Despite the minor dip, the broader technical outlook remains cautiously optimistic, with the pair poised near key levels.
The pivot point stands at $1.3419, a critical juncture that, if breached, could signal further upward movement. Immediate resistance is situated at $1.3361, with additional hurdles at $1.3438 and $1.3507. Should the pair rally above these levels, a renewed bullish push could unfold.
However, on the downside, the first support lies at $1.3198. A move below this level could trigger a deeper correction, with further supports at $1.3114 and $1.3035. These levels will be crucial in determining whether the pound can maintain its overall uptrend or if bearish momentum takes control.
Technically, the RSI is hovering at 66, suggesting that the pair is approaching overbought conditions, signaling caution for traders eyeing further gains.
Meanwhile, the 50-day Exponential Moving Average (EMA) sits at $1.3005, continuing to provide a solid foundation for the pair’s upward trajectory. As long as the price remains above this level, the broader trend remains supportive of the bulls.
In conclusion, a buy-above strategy remains attractive, with an entry price at $1.32643 and a profit target at the pivot level of $1.34194. Traders should consider placing a stop-loss at $1.31995 to protect against downside risks, particularly if the pair fails to break above its immediate resistance.
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