- GBP/USD hits a new five-week low of 1.2672 before rebounding above 1.2700.
- Technical outlook: Bearish momentum with first support at 1.2700, followed by 100-DMA at 1.2683 and 200-DMA at 1.2648.
- For bullish reversal, GBP/USD needs to surpass 50-DMA at 1.2783, targeting 1.2800 and 1.2900.
On Tuesday, the Pound Sterling prolonged its agony and extended its losses against the Greenback. Although sentiment has improved following Monday's stock riot, the buck remains bid, as shown by the GBP/USD pair, which trades at 1.2709, down by 0.49%.
GBP/USD Price Forecast: Technical outlook
During the trading session, the GBP/USD tested the 100-day moving average (DMA) At 1.2683 and dipped to a new five-week low of 1.2672, but buyers emerged and lifted the exchange rate above 1.2700. Despite this, momentum favors sellers, as depicted in the Relative Strength Index (RSI), standing bearish.
With the path of least resistance being tilted to the downside, the GBP/USD first support would be 1.2700. Once surpassed, the pair will test the 100-DMA at 1.2683, followed by the 200-DMA at 1.2648. On further weakness, the pair could challenge the 1.2600 figure.
Conversely, if the GBP/USD climbs above the 50-DMA at 1.2783, that would exacerbate a rally past 1.2800 and expose the 1.2900 figure.
GBP/USD Price Action – Daily Chart
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.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD flirts with monthly lows near 0.6650 ahead of China's trade data
AUD/USD sits at the monthly low near 0.6650 in Tuesday's Asian trading, undermined by weak Australian sentiment data and sustained US Dollar strength. Markets turn cautious amid persistent China economic concerns, awaiting Chinese trade figures for fresh trading incentives.
USD/JPY stalls upside near 143.50, as risk sentiment sours
USD/JPY turns south toward 143.00 early Tuesday, having faced rejection near 143.50. The pair is weighed down by the renewed haven demand for the Japanese Yen, as China's slowdown woes temper risk sentiment. The downside, however, could be capped by the US Dollar recovery.
Gold price ticks lower in a familiar range amid some follow-through USD buying
Gold price struggles to capitalize on the previous day's move up from the $2,485 region and ticks lower during the Asian session on Tuesday amid some follow-through US Dollar strength. Investors trimmed their bets for a larger interest rate cut by the Federal Reserve in September following the release of mixed US monthly jobs report on Friday.
Dogecoin leads meme coin recovery following positive investor sentiment
Dogecoin is up more than 8% on Monday, as it's leading the entire meme coin sector on a rebound. The top meme coin could see a massive rally if it completes a key move within a falling wedge.
Week ahead: ECB poised to cut again, US CPI to get final say on size of Fed cut
ECB is expected to ease again, but will it be another ‘hawkish cut’? US CPI report will be the last inflation update before September FOMC. UK monthly data flurry begins with employment and GDP numbers.
Moneta Markets review 2024: All you need to know
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.