Technical Analysis

GBP/USD Price Analysis – Feb 12, 2024

By LonghornFX Technical Analysis
Feb 12, 20243 min

Daily Price Outlook 

Despite the bearish US dollar, the GBP/USD currency pair failed to maintain its upward trend and turned bearish around the 1.2610 level. However, the reason for its downward trend can be attributed to the bets that the BoE will start cutting rates in the next few months. This undermined the British Pound (GBP) and contributed to the GBP/USD pair's losses. In contrast to this, the broad-based US dollar bearish bias, driven by the risk-on sentiment, may help the GBP/USD pair to trim its losses.

Impact of Fed Rate Cut Expectations on GBP/USD Pair

The broad-based US dollar failed to maintain its upward trend and is struggling to gain momentum due to uncertainty surrounding the Federal Reserve's rate-cut plans. Meanwhile, the risk-on market sentiment is also weighing on the safe-haven dollar, offering some support to the GBP/USD pair.

Market expectations for early rate cuts by the Fed in 2024 are declining, thanks to a resilient US economy and hawkish remarks from FOMC officials. Dallas Fed Bank President Lorie Logan emphasized the need for further evidence on inflation before considering rate cuts. Similarly, Atlanta Fed President Raphael Bostic highlighted persistent high inflation and the US's progress towards pre-pandemic economic levels.

Consequently, the news suggests limited upside for the GBP/USD pair as the dollar struggles amid reduced expectations for Fed rate cuts.

Impact of Potential BoE Rate Cuts on GBP/USD Pair

Another factor undermining the GBP/USD pair is the growing belief that the Bank of England (BoE) might soon lower borrowing costs, which makes traders hesitant to heavily favor the British Pound (GBP). The anticipation of rate cuts by the BoE limits the GBP's potential gains. Market forecasts suggest the BoE could slash interest rates by 25 basis points (bps) four times before the year ends. Hence, traders might also wait for important economic data releases this week, especially the US and UK consumer inflation figures on Tuesday and Wednesday, respectively.

Therefore, this news of potential BoE rate cuts weighs on GBP, limiting its gains against USD. Traders await data releases for further direction.

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

GBP/USD - Technical Analysis

The British pound is treading water against the US dollar, maintaining its position at 1.26288, virtually unchanged from the previous session. This pause in momentum has the GBP/USD pair trading just above a pivotal level at 1.25980, suggesting potential for movement in either direction.

Immediate resistance for the pair is situated at 1.26728, with additional barriers at 1.27204 and the more formidable 1.28020, which could restrict bullish advances. On the flip side, the currency duo finds near-term support at 1.25503, with subsequent safety nets at 1.24710 and 1.24256.

The Relative Strength Index (RSI) presents a neutral stance at 52, neither indicating overbought nor oversold conditions. The Moving Average Convergence Divergence (MACD) reflects a bullish inclination, with a value of 0.00038 surpassing the signal line's 0.00013. This suggests a potential uptick in buying pressure. However, the 50-day Exponential Moving Average (EMA) at 1.26251, while nominally below the current price, hints at a bearish undertone in contrast to other indicators.

Given this setup, the technical outlook for GBP/USD appears to lean towards bullish, with a strategy to place a buy stop at 1.26489. Aiming for a take profit at 1.27083, while a stop loss at 1.25947 is advised to manage potential downside risk.

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