GBP/USD Price Forecast: Holding Strong, But Will It Last?
The GBP/USD pair is showing resilience, rising for the third consecutive day and climbing towards a one-and-a-half-week high. This upward trend is notable, especially considering the pair's recent low in early August, around 1.3250-1.3245. However, the current surge might not be as convincing as it seems.
On Tuesday, disappointing UK employment data sparked speculation that the Bank of England (BoE) could continue cutting rates gradually. This, coupled with concerns about the UK's fiscal outlook ahead of the autumn budget in November, is making traders cautious. As a result, they're hesitant to place aggressive bullish bets on the British Pound (GBP), which is acting as a headwind for the GBP/USD pair.
From a technical perspective, the overnight breakout through the 100-period Simple Moving Average (SMA) on the 4-hour chart and a move beyond the 38.2% Fibonacci retracement level of the recent pullback from a two-month high in September are bullish signs. Additionally, oscillators on the 4-hour chart support the case for further gains.
This suggests a potential rise towards the 50% Fibonacci retracement level, around 1.3480-1.3485, followed by the psychological mark of 1.3500. If this level is breached, it will be a significant trigger for bullish traders, allowing the GBP/USD pair to climb towards the next hurdle near 1.3545-1.3550, or the 61.8% Fibonacci retracement level.
However, there's a catch. Any corrective slide now finds support near the 1.3400 mark. A further pullback could be a buying opportunity near 1.3355 (23.6% Fibonacci level). Below this, the GBP/USD pair could accelerate its fall towards 1.3300, potentially reaching a two-and-a-half-month low of 1.3250-1.3245, as seen on Tuesday.
Pound Sterling FAQs:
The Pound Sterling (GBP) is the world's oldest currency, dating back to 886 AD, and the official currency of the United Kingdom. It's the fourth most traded foreign exchange (FX) unit, accounting for 12% of transactions, with an average daily volume of $630 billion, according to 2022 data. Its key trading pairs include GBP/USD (11% of FX), GBP/JPY (3%), and EUR/GBP (2%).
The Bank of England (BoE) issues the Pound Sterling and bases its monetary policy decisions on achieving price stability, a steady inflation rate of around 2%. The BoE's primary tool for this is adjusting interest rates. When inflation is high, the BoE raises rates, making credit more expensive and benefiting the GBP. Conversely, when inflation is low, the BoE may lower rates to stimulate economic growth.
Economic data releases, such as GDP, Manufacturing and Services PMIs, and employment, can significantly impact the Pound Sterling's value. A strong economy attracts foreign investment and encourages the BoE to raise interest rates, strengthening the GBP. Conversely, weak economic data can lead to a decline in the Pound Sterling's value.
