Technical Analysis

GBP/USD Price Analysis – Aug 24, 2023

By LonghornFX Technical Analysis
Aug 24, 20233 min

Daily Price Outlook

The GBP/USD currency pair failed to stop its slide and continued to drop on Thursday, trading around 1.2710. However, this decline can be linked to disappointing UK PMI data, which showed slower economic growth in the UK. The UK's preliminary PMI data, released on Wednesday, was worse than expected. In the meantime, the S&P Global/CIPS Composite PMI for August fell to 47.9, down from the previous 50.8 and below the expected 50.3. This drop took the index below 50, indicating economic contraction for the first time since January. As a result, the GBP/USD pair faces downward pressure due to concerns about the UK economy's performance.

Impact on GBP/USD Pair: Weaker PMIs and Cautious Investors

The GBP/USD currency pair initially declined, but found some support as US PMIs also disappointed, causing the US dollar to weaken alongside declining Treasury yields. August's S&P Global Manufacturing PMI in the US dropped to 47, below expectations of 49.3, while the Services PMI fell to 51 from 52.3, missing the expected 52.2.

These weaker PMIs signal slower economic growth in both the UK and the US, reducing the probability of upcoming interest rate hikes by their respective central banks. Investors are cautious, awaiting more economic and inflation insights as they watch the US Dollar Index at 103.40 and prepare for Fed Chair Jerome Powell's speech at the Jackson Hole symposium.

Key Economic Data to Watch for GBP/USD Traders

Traders will keep a close eye on the upcoming release of US Initial Jobless Claims and the UK's GfK Consumer Confidence data for August. These reports could provide important insights into the economic situations in both countries, offering new information for GBP/USD traders to consider.

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

GBP/USD - Technical analysis

The GBP/USD currency pair has encountered robust support at the 1.2625 level, prompting a substantial upward rebound that led to a robust test of the pivotal resistance at 1.2725. It's worth noting that the stochastic indicator is displaying evident signs of waning positive momentum, while the EMA50 is exerting downward pressure on the price movement.

Considering these factors, we hold the view that the conditions are conducive for a resumption of bearish trading dynamics in the forthcoming trading sessions. The initial targets in this projection involve a retest of the 1.2625 level. It is important to acknowledge that breaching the 1.2725 resistance level would invalidate the bearish scenario, potentially initiating a reversal towards higher price levels.

The projected trading range for the current day spans from the support level of 1.2620 to the resistance level of 1.2780. The prevailing trend for today is anticipated to lean towards the bearish side.



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