Technical Analysis

GBP/USD Price Analysis – Oct 09, 2023

By LonghornFX Technical Analysis
Oct 9, 20234 min

Daily Price Outlook

The GBP/USD currency pair faced a challenging beginning this week, experiencing a slight dip below the 1.2200 mark. However, it swiftly rebounded and is presently hovering in the range of 1.2220 to 1.2225, approaching the one-week peak it achieved last Friday. However, the primary driver leading its fluctuations is the overall valuation of the US dollar.

On Monday, the British Pound (GBP) experienced a brief decline, primarily driven by escalating concerns surrounding the conflict between Israel and Hamas. These geopolitical tensions led investors to adopt a more cautious stance. Furthermore, the GBP/USD pair faced some downward pressure as market participants anticipated the possibility of the US Federal Reserve (Fed) implementing another interest rate hike.

Meanwhile, in contrast, the Bank of England (BoE) is expected to maintain its current interest rates to prevent concerns about a potential recession in the UK economy.

Global Tensions and US Job Report Impact on USD

It is essential to point out that the US dollar, seen as a safe option in uncertain times, scaled higher because people were worried about safety worldwide. This was sparked by rising tensions in the Middle East, where the Hamas group from Gaza, Palestine, attacked Israeli towns, prompting retaliatory airstrikes and a declaration of war by Israel. This led to many casualties on both sides. However, the uncertainty about what the Federal Reserve will do with interest rates is keeping the USD from making strong gains and is actually helping support the GBP/USD pair.

On another note, the US released its monthly jobs report (NFP) last Friday, and it was better than expected. It showed that the US added 336,000 jobs in September, which is higher than what experts predicted. This makes it more likely that the Fed will raise interest rates again by the end of the year. This expectation is also keeping US Treasury bond yields high and supporting the USD.

Challenges in the UK Economy Amid Inflation Battle

On the flip side, the UK is facing tough situation of high and long-lasting inflation. This means prices for things keep going up, and it's not going away quickly. The country's economic outlook is getting weaker because people aren't buying as much stuff and businesses are hesitant to borrow money because of the high interest rates. The Bank of England (BoE), which manages the country's money, plans to keep these high interest rates until prices stabilize and inflation drops to 2%.

Last week, the GBP/USD pair improved because the BoE said they're confident they can control prices. The BoE Governor, Andrew Bailey, said he thinks inflation might go down to 5% or even less by the end of the year, which is what Prime Minister Rishi Sunak wants. But keeping interest rates high is making it hard for people to buy things and causing more people to lose their jobs.

Looking forward, people are carefully watching a meeting (FPC) about the UK's financial plans. Additionally, August's industrial and manufacturing production data will be closely observed.

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

GBP/USD - Technical Analysis

The GBP/USD currency pair is in focus as forex traders keenly observe the pair's performance, especially against the backdrop of global economic uncertainties. Currently, GBP/USD is trading at 1.2195 as indicated by the latest data on a 4-hour timeframe. Noteworthy price levels for the pair have been identified, with a pivot point at 1.2280. If we witness a bullish momentum, the immediate resistance level for the pair stands at 1.2261, followed by 1.2336 and 1.2398. Conversely, on a potential bearish downturn, the pair could seek support at 1.2175, with subsequent supports looming at 1.2100 and 1.2035.

Looking at the technical indicators, the Relative Strength Index (RSI) reads 39.08. This number leans towards a bearish sentiment, indicating that the market might be under the selling pressure. However, there's a glimpse of hope for the bulls. The Moving Average Convergence Divergence (MACD) value stands at 0.00121 against its signal value of -0.01030, pointing towards a possible upward momentum in the near horizon. Another key indicator, the 50-Day Exponential Moving Average (EMA), is currently at 1.2170. The GBP/USD pair is trading just slightly above this level, which could be seen as a bullish sign in the short term.

From a chart pattern perspective, GBP/USD appears to find considerable support around the 1.2175 mark, aligning closely with the 50 EMA line. This suggests that this particular level could play a pivotal role in influencing the pair's direction in the upcoming sessions.

In conclusion, the GBP/USD pair's immediate trend appears to be cautiously optimistic, leaning bullish above the 1.2170 mark. However, as with all forex trading, global economic cues and geopolitical developments could introduce volatility, so it's imperative for traders to stay informed and vigilant.

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