- GBP/USD remains biased higher, but short-term momentum has turned bearish after falling below 1.3200.
- Key support lies at 1.3146, with additional downside targets at 1.3100 and the recent low of 1.3001.
- On a bounce, resistance levels include 1.3200, the yearly high of 1.3266 and the March 22 peak at 1.3298.
The British Pound erased its earlier gains and fell below 1.3200 against the Dollar after the US Census Bureau reported stronger-than-expected US retail sales. Although the data did not change expectations for a 50 basis points (bps) Fed rate cut, GBP/USD posted losses of over 0.20% and was traded at 1.3186.
GBP/USD Price Forecast: Technical Outlook
GBP/USD has a bullish bias despite the pair dipping below 1.3200 following the US retail sales data. Momentum shifted slightly to the bearish side in the near term, but the Relative Strength Index (RSI) suggests that buyers are in charge and dips should be bought.
If the market continues to fall, the first support for GBP/USD would be the September 15 low of 1.3146. Once cleared, the next stop would be 1.3100, followed by the last swing low at 1.3001.
On further strength, the first resistance for GBP/USD would be 1.3200, followed by the yearly high of 1.3266, before the March 22, 2023 peak of 1.3298.
GBP/USD Price Action – Daily Chart
The British Pound FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded currency unit in the world, accounting for 12% of all transactions and an average of $630 billion a day, as of 2022.
Its key currency pairs are GBP/USD, also known as the “Cable,” which accounts for 11% of the forex market, GBP/JPY, or the “Dragon” as it is known to traders (3%), and EUR/GBP (2%). The British Pound is issued by the Bank of England (BoE).
The most important factor influencing the value of the British Pound is the monetary policy decided by the Bank of England. The Bank of England bases its decisions on achieving its main objective of “price stability”, i.e. a stable inflation rate of around 2%. Its main tool for achieving this is the adjustment of interest rates.
When inflation is too high, the Bank of England tries to contain it by raising interest rates, making credit more expensive for individuals and businesses. This is generally positive for the GBP, as higher interest rates make the UK a more attractive place for global investors to park their money.
When inflation is too low, it is a sign that economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to make credit cheaper, so that companies borrow more to invest in growth-generating projects.
The data released gauges the health of the economy and can influence the value of the Pound. Indicators such as GDP, manufacturing and services PMIs, and employment can influence the direction of the Pound.
A strong economy is good for the British Pound. Not only does it attract more foreign investment, but it may encourage the Bank of England to raise interest rates, which will directly strengthen the British Pound. Conversely, if economic data is weak, the British Pound is likely to fall.
Another significant indicator for the pound is the trade balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports during a given period.
If a country produces highly sought-after exports, its currency will benefit exclusively from the additional demand created by foreign buyers who wish to purchase these goods. Therefore, a positive net trade balance strengthens a currency and vice versa for a negative balance.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
