Technical Analysis

GBP/USD Price Analysis – June 18, 2024

By LonghornFX Technical Analysis
Jun 18, 20243 min

Daily Price Outlook

The GBP/USD pair is currently trading at $1.26825, exhibiting bearish momentum as observed on the 4-hour chart. Despite the broader market sentiment showing some recovery at the beginning of the week, investors remain cautiously optimistic, eyeing a potential Federal Reserve rate cut in September as U.S. economic indicators begin to show signs of softening.

Anticipation for U.S. Economic Indicators

This week's focal point will be the release of U.S. Retail Sales data on Tuesday. Analysts expect a modest uptick in May's figures, with Retail Sales projected to rise by 0.2% month-over-month, recovering from a previous flat growth rate.

Similarly, Core Retail Sales are anticipated to remain steady at 0.2%. Additionally, the Purchasing Managers Index (PMI) figures, due for release on Friday, are predicted to show a slight decrease, reflecting a potential slowdown in manufacturing sector expansion.

Federal Reserve's Prudent Approach

Federal Reserve officials have been cautiously articulating their views throughout the week, underscoring that despite the faster cooling of recent inflation figures, the decision to cut rates prematurely remains unwarranted.

They stress the importance of additional economic data to support any rate adjustments, suggesting a very measured approach to future monetary policy.

UK Economic Outlook and Monetary Policy

On the UK front, Consumer Price Index (CPI) inflation data is expected on Wednesday, with predictions pointing to a slight increase to 0.4% month-over-month for May, up from April's 0.3%. Concurrently, the Bank of England (BoE) is poised to decide on interest rates, with the consensus leaning towards maintaining the current rate of 5.25%.

The Monetary Policy Committee (MPC) is projected to maintain a seven-to-two vote favoring unchanged rates, mirroring their previous stance.

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

GBP/USD - Technical Analysis

GBP/USD is currently trading at $1.26825, showing bearish momentum on the 4-hour chart. The pivot point at $1.27100 is a crucial level for determining the next move. Immediate resistance is seen at $1.27457, with subsequent resistance levels at $1.27645 and $1.28075. To confirm a bullish reversal, these resistance levels need to be breached. On the downside, immediate support is found at $1.26572, with further support levels at $1.26445 and $1.26132. The Relative Strength Index (RSI) is at 39.68, indicating bearish sentiment but not yet in oversold territory.

The 50-day Exponential Moving Average (EMA) at $1.27412 is currently acting as a resistance level. The price needs to break above this EMA to signal a potential shift to bullish momentum. The current price action suggests that a break above the immediate resistance could signal a bullish move, while a drop below the pivot point of $1.27100 may lead to further downside pressure. Monitoring these key levels and EMA crossovers will be essential for short-term trading strategies.

The 200-day EMA at $1.27412 also serves as a significant resistance point that the price needs to surpass to confirm a stronger bullish trend. Considering the current technical outlook, a sell position below $1.27100 is advisable with a take profit target at $1.26445 and a stop loss at $1.27457.

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