Technical Analysis

GBP/USD Price Analysis – May 29, 2024

By LonghornFX Technical Analysis
May 29, 20244 min

Daily Price Outlook

During the European trading session, the GBP/USD currency pair has been unable to stop its downward trend, remaining well-offered around the 1.2760 level and hitting an intra-day low of 1.2746.

The decline can be attributed to a combination of factors, including a soft UK inflation outlook and uncertainty surrounding central bank policies. Traders and investors are closely monitoring economic data releases and central bank statements for further guidance on the future trajectory of the currency pair.

However, the recent data from the British Retail Consortium (BRC) revealed a slowdown in shop price inflation in the UK, with prices of both food and non-food items easing notably in May.

This reduction in inflationary pressures suggests weaker consumer spending and economic activity, dampening investor confidence in the Pound.

Moreover, the prospect of the Bank of England (BoE) unwinding its higher interest rate stance adds further pressure on the Pound. With the UK inflation outlook softening, there are increasing expectations that the BoE may consider rate cuts to stimulate economic growth.

This speculation has weighed on investor sentiment towards the Pound, leading to its depreciation against the US Dollar.

Soft UK Inflation Outlook Raises Speculation of BoE Policy Shift, Impacting GBP/USD Pair

On the UK front, the soft UK inflation outlook has raised concerns about the Bank of England's monetary policy stance, prompting a shift towards lower interest rates. As inflationary pressures in the UK ease, investors anticipate that the BoE may initiate policy normalization by lowering borrowing costs.

However, the potential shift towards lower interest rates by the BoE could significantly impact the GBP/USD currency pair. The expectation of monetary policy divergence between the UK and the US, with the Federal Reserve maintaining a relatively hawkish stance, has led to a depreciation of the Pound against the US Dollar.

Traders and investors are closely monitoring developments in UK inflation and BoE policy decisions for further cues on the future direction of the GBP/USD pair.

US Dollar Strengthens Amid Uncertainty Surrounding US Core PCE Price Index

Amidst uncertainty ahead of the release of the US core Personal Consumption Expenditure (PCE) Price Index, the US Dollar has strengthened, further impacting the GBP/USD currency pair. Investors are awaiting the PCE data for fresh insights into the Federal Reserve's interest rate outlook.

Therefore, the anticipation of steady inflation growth in the US, as indicated by forecasts for the core PCE Price Index, has bolstered expectations of the Federal Reserve maintaining higher interest rates.

This contrasts with the speculation surrounding potential rate cuts by the Bank of England, contributing to the relative strength of the US Dollar against the Pound Sterling.

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

GBP/USD - Technical Analysis

The GBP/USD pair is currently trading at $1.27490, reflecting a decline of 0.12% in the latest session. The pivot point, marked at $1.2793, serves as a crucial level for determining market direction.

Immediate resistance levels are observed at $1.2765, $1.2793, and $1.2822. On the downside, immediate support is found at $1.2711, followed by $1.2676 and $1.2648.

The Relative Strength Index (RSI) is positioned at 52, indicating a neutral market sentiment with a slight bullish bias.

The 50-day Exponential Moving Average (EMA) stands at $1.2724, suggesting that the current price is slightly above this short-term average, which generally supports a bullish outlook.

The recent decline in the GBP/USD pair can be attributed to a stronger US Dollar, bolstered by robust US economic data and hawkish comments from Federal Reserve officials.

This has raised expectations that the Fed may not cut interest rates in the near term, supporting the USD and putting downward pressure on the British Pound. However, the market remains cautious as traders await key economic indicators and potential developments in the UK's economic landscape.

From a technical perspective, a bullish trend may be initiated if the price manages to sustain above the pivot point of $1.2793. This could lead to potential gains towards the immediate resistance levels at $1.2765 and beyond.

Conversely, if the GBP/USD pair falls below the immediate support level of $1.2711, further declines towards $1.2676 and $1.2648 are likely.

In conclusion, the outlook for GBP/USD remains cautiously bullish above the pivot point of $1.2793. The recommended entry price for a potential buy position is $1.27332, with a take profit target set at $1.27927 and a stop loss at $1.27036.

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