GBP/USD Forecast: Sellers look to retain control while Pound Sterling stays below 1.3100
- GBP/USD trades at its lowest level in over two weeks below 1.3100.
- Improving risk mood could help the pair limit its losses.
- Buyers could stay on the sidelines while 1.3100 holds as resistance.
GBP/USD came under bearish pressure in the American session on Friday and erased its gains to end the week flat. The pair continues to edge lower at the beginning of the new week and was last seen trading at its lowest level since August 22 below 1.3100.
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 weakest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.00% | 0.30% | -1.91% | 0.61% | 1.65% | 1.75% | -0.12% | |
| EUR | -0.00% | 0.32% | -1.93% | 0.58% | 1.66% | 1.74% | -0.14% | |
| GBP | -0.30% | -0.32% | -2.25% | 0.25% | 1.31% | 1.45% | -0.47% | |
| JPY | 1.91% | 1.93% | 2.25% | 2.51% | 3.66% | 3.85% | 1.74% | |
| CAD | -0.61% | -0.58% | -0.25% | -2.51% | 1.08% | 1.14% | -0.72% | |
| AUD | -1.65% | -1.66% | -1.31% | -3.66% | -1.08% | 0.07% | -1.76% | |
| NZD | -1.75% | -1.74% | -1.45% | -3.85% | -1.14% | -0.07% | -1.84% | |
| CHF | 0.12% | 0.14% | 0.47% | -1.74% | 0.72% | 1.76% | 1.84% |
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).
Despite the weak labor market data, the US Dollar (USD) benefited from the intenst flight-to-safety seen ahead of the weekend and forced GBP/USD to push lower.
The US Bureau of Labor Statistics announced on Friday that Nonfarm Payrolls rose 142,000 in August. This reading followed the 89,000 (revised from 114,000) increase recorded in July and fell short of the market forecast of 160,000. Other details of the report showed that the Unemployment Rate edged lower to 4.2% as anticipated, while the annual wage inflation, as measured by the change in the Average Hourly Earnings, rose to 3.8% from 3.6%.
In the European session on Monday, the UK's FTSE 100 Index is up more than 0.5% on the day and US stock index futures rise between 0.4% and 0.75%. In the absence of high-tier macroeconomic data releases, the USD could have a hard time preserving its strength in case risk flows dominate the action in financial markets in the second half of the day.
On Tuesday, the UK's Office for National Statistics will release employment data. The August Consumer Price Index (CPI) data from the US will be scrutinized by market participants on Wednesday.
GBP/USD Technical Analysis
GBP/USD closed a 4-hour candle below the 100-period Simple Moving Average (SMA) for the first time since mid-August. Meanwhile, the Relative Strength Index (RSI) indicator on the 4-hour chart stays near 30, suggesting that the pair is close to turning oversold.
In case 1.3100 (100-period SMA) stays intact as resistance, sellers could look to retain control of GBP/USD's action. On the downsde, 1.3040 (Fibonacci 38.2% retracement level of the latest uptrend) aligns as next support before 1.3000 (psychological level, static level) and 1.2960-1.2970 (Fibonacci 50% retracement, 200-period SMA).
If GBP/USD manages to flip 1.3100 into support, it could face next resistance at 1.3130 (Fibonacci 23.6% retracement) ahead of 1.3150 (50-period SMA) and 1.3200 (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.
Premium
You have reached your limit of 3 free articles for this month.
Start your subscription and get access to all our original articles.
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.
