GBP/USD Price Forecast: The bearish outlook remains in play below 1.2950

GBP/USD drifts lower to 1.2945 in Monday’s early European session, down 0.11% on the day.
The negative view of the pair remains in play below the 100-day EMA and bearish RSI indicator.
The first downside target is located at 1.2870; the immediate resistance level emerges at 1.3000.

The GBP/USD pair extends the decline to around 1.2945 during the early European session on Monday. A bullish US Dollar (USD) on the back of bets for a less aggressive easing by the Federal Reserve (Fed) drags the pair lower. In the absence of top-tier economic data released from the UK and the US, the USD price dynamics will continue to play a key role in influencing the pair.

GBP/USD keeps the bearish vibe unchanged as the major pair holds below the key 100-period Exponential Moving Average (EMA) on the daily timeframe. The downward momentum is also supported by the Relative Strength Index (RSI), which stands below the 50-midline near 37.70, supporting the sellers in the near term.

The lower limit of the Bollinger Band at 1.2870 acts as an initial support level for GBP/USD. A decisive break below this level could see a drop to 1.2763, the low of August 13. The additional downside filter to watch is 1.2665, the low of August 8.

On the upside, the first upside barrier emerges at the 1.3000 psychological level. A move past the mentioned level could clear the way for a climb to the next potential bullish target at 1.3071, the high of October 18. The next hurdle is seen at 1.3185, the high of September 5.

GBP/USD daily chart

Pound Sterling FAQs

What is the Pound Sterling?

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, also known as ‘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).

How do the decisions of the Bank of England impact on the Pound Sterling?

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.

How does economic data influence the value of the Pound?

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.

How does the Trade Balance impact the Pound?

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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