GBP/USD Forecast: Pound Sterling could face next resistance at 1.2860
- GBP/USD holds steady above 1.2800 in the European session on Monday.
- The near-term technical outlook highlights overbought conditions for the pair.
- 1.2860 could be seen as next technical resistance.
GBP/USD preserved its bullish momentum on Friday and closed the previous week above 1.2800. The pair stays relatively quiet in the European morning on Monday and the near-term technical outlook points to overbought conditions.
British Pound PRICE Last 7 days
The table below shows the percentage change of British Pound (GBP) against listed major currencies last 7 days. British Pound was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -1.16% | -1.37% | 0.18% | -0.29% | -1.06% | -0.66% | -0.29% | |
| EUR | 1.16% | -0.44% | 1.05% | 0.57% | -0.02% | 0.20% | 0.55% | |
| GBP | 1.37% | 0.44% | 1.47% | 1.02% | 0.42% | 0.64% | 0.99% | |
| JPY | -0.18% | -1.05% | -1.47% | -0.48% | -1.18% | -0.84% | -0.46% | |
| CAD | 0.29% | -0.57% | -1.02% | 0.48% | -0.74% | -0.37% | -0.02% | |
| AUD | 1.06% | 0.02% | -0.42% | 1.18% | 0.74% | 0.22% | 0.67% | |
| NZD | 0.66% | -0.20% | -0.64% | 0.84% | 0.37% | -0.22% | 0.38% | |
| CHF | 0.29% | -0.55% | -0.99% | 0.46% | 0.02% | -0.67% | -0.38% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
The renewed selling pressure surrounding the US Dollar (USD) fuelled another leg higher in GBP/USD ahead of the weekend.
Although the data published by the US Bureau of Labor Statistics showed that Nonfarm Payrolls (NFP) rose 206,000 in June, surpassing the market expectation of 190,000, the negative revision to May's NFP, from 272,000 to 218,000, caused the USD to weaken. Additionally, the BSL also reported that the Unemployment Rate ticked up to 4.1%, while the annual wage inflation softened to 3.9% from 4.1% in May, reflecting loosening conditions in the labor market.
The US economic calendar will not offer any high-impact data releases on Monday and US stock index futures trade little changed on the day.
On Tuesday, Federal Reserve Chairman Jerome Powell will testify before the Senate Banking Committee ahead of his testimony before the House Financial Services Committe on Wednesday. In its Semi-Annual Monetary Policy Report published on Friday, the Fed noted that they have seen modest further progress on inflation this year but added that they still need greater confidence before moving to rate cuts.
GBP/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart stays near 80, highlighting overbought conditions for the pair. In case GBP/USD stages a correction, 1.2800 (psychological level, static level) aligns as immediate support before 1.2750 (static level) and 1.2700 (20-day Simple Moving Average).
On the upside, 1.2860 (June 12 high) could be seen as next resistance before 1.2900 (psychological level, static level).
Pound Sterling 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 unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, aka ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
