Technical Analysis

GBP/USD Price Analysis – Dec 25, 2023

By LonghornFX Technical Analysis
Dec 25, 20234 min

Daily Price Outlook

The GBP/USD currency pair has maintained its upward momentum, reaching the 1.2700 level. This surge can be attributed to the positive Retail Sales report in November from the UK, surpassing expectations. Simultaneously, the weakened US dollar, influenced by the dovish stance of the Federal Reserve, has further bolstered the GBP/USD pair. These factors together are pushing the GBP/USD pair up, showing a connection between the strong UK retail sector and the cautious approach of the US Federal Reserve, which is making the US dollar weaker.

UK Retail Sales Resilience Amidst GDP Variations and Impact on GBP/USD Pair

It's worth noting that UK Retail Sales had a strong month in November, growing by 1.3% compared to the expected 0.4%. This rebounded from October, where sales were flat at 0.0%. The yearly figures also exceeded predictions, showing a 0.1% increase instead of the expected -1.3%, recovering from the previous -2.5% (slightly revised from -2.7%).

Despite a less-than-expected UK Gross Domestic Product (GDP) print, which came in at 0.3% instead of the anticipated 0.6%, Pound Sterling remained strong. The quarterly GDP declined by -0.1%, not meeting the expected 0.0% flat reading. However, the robust Retail Sales performance helped offset these GDP figures.

Therefore, the GBP/USD pair received a boost from the strong UK Retail Sales despite lower-than-expected GDP. The positive sales data outweighed economic concerns, contributing to the Pound Sterling's resilience against the US dollar.

Recent Economic Indicators and Their Impact on the GBP/USD Pair

Furthermore, the US Dollar experienced downward pressure, mainly attributed to a slowdown in inflation. The US Personal Consumption Expenditure (PCE) Price Index for November indicated a deceleration in inflation, with an annualized Core PCE inflation of 3.2%. This figure is slightly below the anticipated 3.3% and a bit lower than the revised previous rate of 3.4% (adjusted down from 3.5%).

US Durable Goods Orders for November exceeded expectations, indicating that the US economy might not be weakening as swiftly as some investors had feared. The substantial 5.4% increase surpassed the predicted 2.2%, bouncing back from the revised previous figure of -5.1% (adjusted from -5.4%).

Therefore, the GBP/USD pair gained from a weakened US Dollar, with slowing inflation and Durable Goods Orders surpassing expectations, signifying a robust US economy. This bolstered the Pound, leading to its strength against the US dollar.

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

GBP/USD - Technical Analysis 

On this Christmas Day, the GBP/USD pair is exhibiting a slight upward movement, currently trading at 1.26983, a modest increase of 0.06%. This subtle yet positive shift reflects cautious optimism in the market, amidst global economic uncertainties and holiday trading conditions.

The pivot point for the pair is set at $1.2523, serving as a key juncture for future price movements. The immediate resistance is identified at $1.2647, followed by further resistance levels at $1.2813 and $1.2951. On the downside, the support levels are placed at $1.2363, $1.2225, and $1.2088, which could provide crucial buffers against any potential declines.

The Relative Strength Index (RSI) for GBP/USD stands at 53, suggesting a slight bullish bias but not excessively so, indicating that the pair could have more room for upward movement.

The Moving Average Convergence Divergence (MACD) displays a value of 0.000340, with the signal line at 0.000800. This configuration points to a potential bullish momentum, albeit with a degree of caution, as market conditions remain fluid.

The 50-Day Exponential Moving Average (EMA) for the pair is at $1.2694, aligning closely with the current price, suggesting that the pair is maintaining a short-term bullish trend.

A key observation in the chart pattern is the overall upward channel, which supports a buying trend in GBP/USD. This pattern indicates a steady but gradual ascent, providing a favorable environment for potential bullish momentum.

In conclusion, the overall trend for GBP/USD appears bullish, particularly if the pair sustains above the 1.2630 level. In the short term, the pair is likely to test the immediate resistance levels, with the potential to push towards higher resistances, depending on the broader market sentiment and economic developments.

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