Technical Analysis

GBP/USD Price Analysis – April 01, 2024

By LonghornFX Technical Analysis
Apr 1, 20244 min

Daily Price Outlook

Despite the Bank of England (BoE) is expected to reduce interest rates three times by a quarter-point each in 2024, the GBP/USD currency pair maintained its upward trend and remained well-bid above the 1.2530 level. However, the reason for its upward trend can be attributed to several factors including the weakness of the US dollar. The US dollar faced bearish pressure following dovish comments from Federal Reserve Chairman Jerome Powell.

Powell's remarks indicated that recent US inflation data was in line with expectations, supporting the Fed's stance on potential interest rate cuts throughout 2024. This dovish sentiment regarding future rate cuts has undermined the US dollar and contributing the GBP/USD pair gains.

Another factor that has been boosting the GBP/USD pair was the good economic signs in the UK. Despite concerns about the UK economy possibly entering a recession in 2023, recent indicators such as Nationwide Housing Prices, S&P Global PMI, and Halifax House Prices data have shown that the UK economy is holding up well. This positive news has increased investor confidence in the British Pound (GBP), making it stronger against the US Dollar (USD).

In addition to this, market sentiment surrounding Brexit has improved, providing further support to the GBP. The UK and the European Union (EU) have made progress in resolving post-Brexit trade issues, reducing uncertainty for businesses and investors. As a result, the improved market sentiment surrounding Brexit, with progress in post-Brexit trade issues between the UK and EU, has further supported the GBP/USD pair, boosting the value of the British Pound.

Impact of Fed Chairman Jerome Powell's Dovish Comments on GBP/USD Currency Pair

On the US front, the dovish comments from Fed Chairman Jerome Powell had a notable impact on the GBP/USD currency pair. The broad-based US dollar losing its momentum as market participants reacted to Powell's remarks indicating the possibility of interest rate cuts in 2024. The dovish stance taken by the US Federal Reserve weakened the US dollar against major currency pairs, including the GBP/USD. This decline in the dollar's value strengthened the GBP, causing an upward trend in the GBP/USD pair.

Impact of Bank of England's Anticipated Rate Reductions on GBP/USD Currency Pair

Despite the anticipated three rate cuts by the Bank of England in 2024, the GBP/USD pair has shown resilience, largely unaffected by these expectations. This is attributed to other supportive factors bolstering the British pound, thus maintaining its strength against the US dollar. However, the positive performance of key economic indicators and improved sentiment regarding Brexit have helped the GBP/USD currency pair to stay bid.

GBP/USD Price Chart - Source: Tradingview
GBP/USD Price Chart - Source: Tradingview

GBP/USD - Technical Analysis

The GBP/USD pair showed a marginal increase on April 1st, trading at 1.26255, reflecting a 0.07% rise. The currency pair currently hovers near a pivot point of 1.2647, with resistance levels at 1.2690, 1.2745, and 1.2805 suggesting potential hurdles for upward movements. Conversely, the support levels are positioned at 1.2587, 1.2540, and 1.2502, which could provide stabilization in case of a decline.

The technical landscape, as denoted by a Relative Strength Index (RSI) of 47, illustrates a neutral market sentiment, with the 50-day Exponential Moving Average (EMA) at 1.2649 closely aligned with the current trading range, reinforcing the pivotal role of the 1.2647 mark. GBP/USD's trading pattern has been characterized by choppy movements within a narrow band between 1.2645 and 1.2585. A decisive break out of this range is anticipated to set the future course for the pair.

Given the current technical setup and impending economic events, a cautious approach is recommended. A potential trading strategy would be to initiate a sell position below 1.26471, targeting 1.25857, with a stop loss at 1.26828 to mitigate risk. 

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