GBP/USD Technical Analysis:
- The Relative Strength Index (RSI) on the 4-hour chart has turned south, falling below 40. This reflects buyers’ hesitancy.
- GBP/USD lost traction after testing the key resistance level at 1.2880, where the descending trend line, Fibonacci 38.2% retracement level of the latest uptrend, and the 100-period Simple Moving Average (SMA) converge.
- Immediate support aligns at 1.2830 (Fibonacci 50% retracement). If this support fails, additional losses toward 1.2800-1.2790 (psychological level, 200-period SMA) could occur before 1.2750 (static level).
- First resistance lies at 1.2880 (Fibonacci 38.2% retracement, descending trend line), followed by 1.2900 (psychological level, static level, 100-period SMA), and 1.2940 (Fibonacci 23.6% retracement).
Fundamental Overview:
- GBP/USD remains under pressure, trading below 1.2850.
- The Bank of England (BoE) is expected to announce its monetary policy decision soon. Growing expectations for a BoE rate cut make it challenging for Pound Sterling to find demand.
- The Federal Reserve (Fed) is widely expected to leave policy settings unchanged in its upcoming meeting. Markets have already priced in a 25 bps Fed rate reduction in September.
- As we head into the BoE meeting, Pound Sterling’s valuation could continue to influence GBP/USD’s action.
- The economic calendar lacks high-impact data releases, which may hinder a near-term rebound for GBP/USD.
Key Points:
- EUR/USD remains steady around 1.1040 following mixed economic data from the Eurozone.
- German Prelim CPI shows a modest increase of 0.3%, while Spanish Flash GDP meets expectations at 0.8%.
- US consumer confidence is expected to decline slightly to 99.7, with JOLTS job openings at 8.02 million.
Market Overview:
Early in the European session, the Euro faced pressure due to French consumer spending data, which declined by 0.5%. However, French Flash GDP remained stable at 0.3%. The German Prelim CPI also showed a modest rise of 0.3%, aligning with forecasts, while the Spanish Flash GDP met expectations at 0.8%. These mixed results have led to cautious trading, with the EUR/USD hovering around 1.1040.
Upcoming Events:
Looking ahead, Italian and German Prelim GDP data are anticipated, with forecasts of 0.2% and 0.1% growth, respectively. A broader Prelim Flash GDP for the Eurozone is also expected at 0.2%. These figures will play a crucial role in shaping the Euro’s short-term outlook. Additionally, bond auctions in Italy and the UK will provide insights into investor confidence, with the Italian 10-year bond yield currently at 4.01% and the UK’s at 4.07%.
In the US, consumer confidence data is projected to dip to 99.7, while job openings (JOLTS) are estimated at 8.02 million. The Dollar Index (DXY), currently around 102.50, may experience volatility based on these outcomes. If consumer confidence remains robust, the DXY could extend its gains beyond the $104.50 mark.
Let’s explore the longer-term outlook for the GBP/USD (British Pound to US Dollar) exchange rate based on various forecasts:
- LongForecast expects the pair to exhibit high volatility and fluctuate within a wide range. Their predictions span from 1.199 to 1.4641.
- WalletInvestor assumes a bearish stance, projecting a gradual decline for GBP/USD. They anticipate the pair to reach 1.199 in the long term1.
- Exchangerates.org.uk provides a more optimistic view. In eleven months, they expect the Pound-to-Dollar exchange rate to trade at 1.2896 (Q2 2025), and in one year and two months, it could reach 1.3054 (Q3 2025)2.
- Capex.com suggests that while the UK may avoid an official recession, the economy and the Bank of England may face stagflation. Their forecast indicates that GBP/USD will resume its downtrend after peaking in late 2024, potentially trading as low as 1.10 in the next five years3.
Remember that these predictions are subject to various economic factors and market dynamics. Always stay informed and consider multiple sources when making financial decisions.