Technical Analysis

GBP/USD Price Analysis – Aug 15, 2023

By LonghornFX Technical Analysis
Aug 15, 20233 min

Daily Price Outlook

Despite the strong performance of the US dollar, the GBP/USD currency pair has continued its upward trend, gaining considerable momentum and surpassing the 1.2712 level. This upward movement has been bolstered by the encouraging economic growth figures recently released in the UK.

Furthermore, positive developments in wage growth and an unexpected positive outcome in Employment Change have created a favorable environment for the British pound. However, it's worth noting that the ongoing strength of the US dollar has acted as a limiting factor, capping further gains in the the GBP/USD pair.

UK Wage Growth and BoE Outlook Impact on GBP/USD Pair

Moreover, the Chartered Institute of Personnel and Development in the UK recently conducted a survey, and their findings have added another interesting layer to the ongoing story. According to the survey, HR executives are anticipating a solid 5% increase in basic pay rates. This steady upward trend in wages aligns with the optimistic outlook for the Bank of England (BoE).

All eyes are now eagerly awaiting the release of the upcoming UK wage growth data. The predictions are pointing towards a potentially record-breaking high in wage growth for the month of July. Hence, the strong outcome from this data will likely enhance the prospects of a BoE interest rate hike in November, a move that could have a positive impact on the value of the British Pound.

However, it's important to acknowledge the flip side as well. If the wage growth data falls short of expectations, there might be concerns about a potential economic recession. This could result in a shift in sentiment, leading the GBP/USD currency pair to move in the opposite direction, as market participants reassess the economic landscape.

US Dollar Strength Impacts GBP/USD Amidst Fed's Stance and Global Factors

Moreover, traders are treading cautiously when it comes to betting on the GBP/USD pair due to the robust stance of the US Dollar. The USD Index (DXY), which measures the dollar against other currencies, is lingering around a two-month peak achieved earlier this week. This is mainly because of the widespread belief that the Federal Reserve intends to stick with higher interest rates for the foreseeable future. This sentiment got a boost from US data indicating ongoing challenges in reaching the Fed's 2% inflation target.

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

GBP/USD - Technical analysis

The GBP/USD pair adeptly met our initial forecasted target at 1.2625, encountering robust support at this juncture. This was accompanied by a transient bullish inclination. Intriguingly, the stochastic indicator has unmistakably lost its upward drive, while the EMA50 consistently exerts downward pressure on the currency's valuation.

Given these dynamics, our prognosis leans towards a bearish trajectory for the ensuing phase. For this forecast to materialize, the pair must decisively penetrate the aforementioned 1.2625 mark, setting its sights on 1.2505 as the subsequent bearish milestone. It's crucial to underscore that any surge beyond 1.2725, and subsequently 1.2825, would negate this bearish outlook, potentially catalyzing an upward price movement.



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