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- GBP/USD stabilized after a positive UK GDP report and a rise in the US PCE index.
- Technical indicators limit the pair at 1.2700, which is key to buyer momentum.
- Strong support at 1.2634/45 (50 and 100-DMA); RSI indicates seller dominance, risk of further losses.
The GBP/USD pair was weak during the North American session on Friday after the positivity in the UK. gross domestic product However, a rise in the Federal Reserve’s preferred inflation gauge, the personal consumption expenditures price index, has limited the key pair, which is trading at 1.2642, almost unchanged.
GBP/USD Price Analysis: Technical Outlook
After rebounding from the lowest weekly levels recorded on Wednesday, GBP/USD The stock managed to limit its losses and remained below the psychological level of 12,700, which is a crucial level for buyers to regain control.
However, sellers are also under pressure as they face strong support at the confluence of the 50- and 100-day moving averages (DMAs) at around 1.2634/45, which if broken could exacerbate the downtrend.
The Relative Strength Index (RSI) indicates that sellers are still in control, which means further losses are expected.
The psychological level of 1.2600 will act as the first support. Once it is broken, the next demand area to challenge will be the 200-day moving average at 1.2555, followed by the 1.2500 level.
In order for the uptrend to continue, traders should demand the 1.2700 level and clear the previous support-turned-resistance trend line at around 1.2730/40.
GBP/USD price action – daily chart
Questions and answers about the pound sterling
The British Pound (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit of the foreign exchange (FX) market in the world, accounting for 12% of all transactions, averaging $630 billion per day, according to 2022 data. The main trading pairs are GBP/USD, also known as “cable”. , which represents 11% of the foreign exchange market, GBP/JPY, or “the dragon” as traders know it (3%), and EUR/GBP (2%). The pound sterling is issued by the Bank of England (BoE).
The most important factor that affects the value of the pound is the monetary policy set by the Bank of England. The Bank of England bases its decisions on whether it has achieved its primary goal of “price stability” – a stable inflation rate of around 2%. Its primary tool for achieving this is adjusting interest rates. When inflation is too high, the Bank of England will try to rein it in by raising interest rates, making it harder for people and businesses to access credit. This is generally positive for the pound, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls to a very low level, it is a sign that economic growth is slowing. In this scenario, the Bank of England will consider cutting interest rates to reduce credit so that businesses will borrow more to invest in growth-generating projects.
The data released measures the health of the economy and can affect the value of the pound sterling. Indicators such as GDP and PMIs in the manufacturing, services and employment sectors can influence the direction of the pound. A strong economy is good for the pound. Not only would it attract more foreign investment, but it could encourage the Bank of England to raise interest rates, which would directly strengthen sterling. Otherwise, if economic data is weak, the British pound is likely to fall.
Another important piece of data relating to the pound is the trade balance. This measure measures the difference between what a country earns from its exports and what it spends on imports over a given period of time. If a country produces highly demanded exports, its currency will benefit purely from the additional demand generated by foreign buyers seeking to purchase these goods. Thus, a positive net trade balance strengthens the currency and vice versa for a negative balance.
