Technical Analysis

GBP/USD Price Analysis – Nov 22, 2023

By LonghornFX Technical Analysis
Nov 22, 20234 min

Daily Price Outlook

Despite the bullish trend in the US dollar, the GBP/USD currency pair prolonged its winning streak and drew some additional bids around the 1.2540 level. However, the upward momentum in the pair can be attributed to the hawkish remarks made overnight by the Bank of England's (BoE) Bailey. These comments bolstered the British pound and contributed to the gains in the GBP/USD pair.

Meanwhile, the minutes from the Federal Reserve's (Fed) meeting held on October 31-November 1 revealed that policymakers supported the idea of maintaining higher interest rates for an extended period to combat inflation. This stance helped the US dollar regain its lost momentum, leading to a slight surge on the day.

Consequently, the bullish bias in the US dollar was seen as a key factor that kept the lid on any additional gains in the GBPUSD pair.

BoE's Hawkish Stance Fuels GBP/USD Surge

As we mentioned above the British Pound is experiencing a boost due to recent positive comments from Bank of England (BoE) officials. They have indicated their intention to maintain high interest rates for an extended period to address inflation concerns in the UK.

During a meeting on Tuesday, Bank of England Governor Andrew Bailey expressed concern that investors are placing excessive reliance on recent data without fully appreciating the potential persistence of inflation in the UK. He underscored the BoE's commitment to maintaining high-interest rates for an extended duration, opposing the notion that rates might be lowered by June 2024.

Hence, the optimistic remarks from the Bank of England, highlighting the commitment to maintaining high-interest rates for an extended period to address inflation, have propelled the GBP/USD pair.

US Dollar's Struggles Amid Fed's Mixed Signals and Rate Cut Anticipation

Moreover, the US Dollar struggles to bounce back despite a recent recovery, following the Federal Reserve's (Fed) meeting minutes suggesting a plan for keeping interest rates higher for an extended period to control inflation. However, this boosted the US dollar. Although, the positive market response didn't last because many believe the Fed will likely maintain current interest rates instead of raising them.

Meanwhile, the expectation of a potential rate cut at the April 30-May 1 policy meeting is further dampening the US dollar. This anticipation is keeping the yield on the 10-year US government bond low for the time being, diminishing the attractiveness of the USD.

Looking forward, traders will look to US data, including Weekly Initial Jobless Claims, Durable Goods Orders, and the revised Michigan Consumer Sentiment Index, for market direction.

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

GBP/USD - Technical Analysis

As of November 22, the GBP/USD pair exhibits a complex movement pattern in the forex market, trading at 1.25353, marking a slight decrease of 0.01%. This minor fluctuation occurs within a larger framework of shifting economic conditions and adjustments in monetary policy in both the UK and the US.

The pair's key pivot point is established at 1.2575. It faces immediate resistance at 1.2683, with further potential barriers at 1.2853 and 1.3027. On the downside, support levels are identified at 1.2397, followed by 1.2285 and 1.2115, which are crucial in preventing further declines.

From a technical standpoint, the Relative Strength Index (RSI) stands at 68, suggesting a bullish trend that hasn't yet reached overbought conditions. The MACD, with a value of 0.000010 and a signal value of 0.003860, indicates potential upward momentum, as it is positioned slightly above the signal line. Additionally, the current price hovers just above the 50-Day Exponential Moving Average (EMA) at 1.2526, further reinforcing the bullish inclination.

Chart analysis, including patterns and candlestick formations, points towards possible bullish momentum, especially if the pair remains above the pivot point.

In conclusion, the overall trend for GBP/USD appears cautiously bullish, particularly if it sustains above the 1.2575 level. However, a fall below this pivot could shift the sentiment to bearish. In the short term, the pair is expected to challenge the resistance at 1.2683, and if the bullish trend continues, it may test even higher levels.

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