Technical Analysis

GBP/USD Price Analysis – Jan 29, 2024

By LonghornFX Technical Analysis
Jan 29, 20243 min

Daily Price Outlook 

Despite the decline in the UK public's inflation expectations and a bullish US dollar, the GBP/USD currency pair maintained its upward stance and remained well bid around the 1.2708 level. However, the reason can be linked to the reduced bets for an early BoE rate cut, which underpins the GBP and lends some support to the pair. In the meantime, traders seem hesitant to place any strong positions as they prefer to wait for more cues about the Federal Reserve (Fed) interest rates policy. Therefore, the investor's focus will be on the outcome of the highly-anticipated two-day FOMC monetary policy meeting starting on Tuesday.

FOMC Meeting and US Economic Indicators: Impact on Monetary Policy and Currency Markets

It's important to highlight that the focus is on the upcoming two-day FOMC monetary policy meeting starting on Tuesday, with uncertainty surrounding the timing of the first interest rate cut. It should be noted that the recent data, released on Friday, indicates a modest rise in US inflation for December. This reinforces expectations that the Federal Reserve might cut rates by mid-2024. However, strong growth in Personal Incomes and positive Q4 GDP suggest the economy is still doing well. This raises doubts about the Federal Reserve's potential for aggressive policy easing, supporting the US Dollar and likely putting a cap on the GBP/USD pair.

Therefore, the news suggests that doubts about aggressive policy easing by the Federal Reserve support the US Dollar, which could cap the GBP/USD pair.

BoE Policy Outlook and UK Inflation Expectations Impact on GBP/USD

Moreover, the increasing expectation that a slight improvement in the UK's sluggish economy might delay the Bank of England's (BoE) move to ease policies. This support for the British Pound (GBP) could continue backing the GBP/USD pair. In other news, a survey by US bank Citi and polling firm YouGov revealed that UK public expectations for inflation in the coming year dipped. From 4.2% in October, it fell to 3.9% in November and further to 3.5% in December. Long-term inflation expectations also declined to 3.4%. Surprisingly, this news hasn't significantly impacted GBP/USD, which remains steady at around 1.2700.

Therefore, the expectation of a delayed Bank of England policy easing, supporting the British Pound (GBP), could continue backing the GBP/USD pair. Despite falling UK inflation expectations, GBP/USD remains steady around 1.2700, suggesting limited immediate impact.

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

GBP/USD - Technical Analysis

The British Pound (GBP) against the US Dollar (USD) demonstrates a subtle yet intricate market movement. As of January 29, the GBP/USD pair trades at 1.27034, reflecting a marginal decline of 0.01%. Analyzing the 4-hour chart, several key levels emerge, shaping the currency pair's immediate technical outlook.

The Relative Strength Index (RSI) stands at 47, suggesting a neutral market momentum. The Moving Average Convergence Divergence (MACD) shows a value of -0.00027, indicating a slight bearish bias as it hovers just below the signal line. The 50-day Exponential Moving Average (EMA) at 1.2711 closely aligns with the current price, offering a near-term reference point for trend direction.

In conclusion, the GBP/USD pair exhibits a neutral to slightly bearish trend in the short term. For traders looking at entry opportunities, a buy position might be considered above 1.26957, targeting a take-profit level at 1.27335, with a stop loss at 1.26704. This cautious approach reflects the pair's current stability, poised between key technical levels.

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