Technical Analysis

GBP/USD Price Analysis – Sep 27, 2023

By LonghornFX Technical Analysis
Sep 27, 20233 min
Signal 2023 05 25 122627 002

Daily Price Outlook

The GBP/USD currency pair failed to stop its five-day losing streak and remained well offered around below 1.2150 mark as investors are worried that the UK's economy might go into a recession. This is mainly because the job market is not doing well, and people are not spending much money. It is worth recaling that the Bank of England was supposed to raise interest rates to control inflation, but now they might not do that, which could make prices go up even more.

Furthermore, the US dollar is performing strongly, further contributing to the GBP/USD decline. The Federal Reserve in the US is being cautious with its monetary policies, which is boosting the strength of the US dollar. Traders are closely watching for any changes in the UK's GDP data, but it's expected to remain stable.

BoE's Rate Pause Adds Pressure on GBP/USD Amid Economic Concerns

It's important to highlight that the Bank of England surprised everyone by halting its planned interest rate increases due to worries about the UK's struggling economy and rising uncertainty about inflation. The spike in global oil prices is also driving up energy costs, which could worsen inflation and possibly lead to a challenging situation called stagflation.

Investors are concerned about the global economy and the possibility of higher interest rates. In the UK, weak demand has led to job cuts by companies, even though wages are still rising, keeping inflation a concern. Despite strong wage growth and persistent inflation, the BoE is more focused on economic stability, as seen in its recent decision to pause rate hikes. Therefore, this unexpected move by the Bank of England has put pressure on the GBP/USD currency pair.

Impact on GBP/USD Pair Amid Strong US Dollar and Hawkish Federal Reserve

Despite mixed US economic data, the US dollar is strengthening. While US Consumer Confidence slipped in September, Building Permits and the House Price Index showed positive signs in August and July. The US dollar's resilience is mainly due to the Federal Reserve's hawkish stance on interest rates, boosting US Treasury yields, which are near a 14-year high at 4.51%. Traders are watching upcoming reports like US Durable Goods Orders and the Core PCE Price Index, expected to ease slightly from 4.2% to 3.9%.

The US Dollar Index (DXY) is at 106.30, its highest since last December. The Federal Reserve aims for a 25 basis point rate hike by year-end and rates above 5% next year, putting pressure on the GBP/USD pair as the robust US dollar outweighs lackluster US economic data.

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

GBP/USD - Technical Analysis

The GBP/USD pair has stabilized around the 1.2155 mark since this morning. As long as the price remains below the 1.2210 threshold, the bearish outlook continues to be the predominant forecast for the foreseeable future. This perspective is reinforced by the negative influence exerted by the EMA50. It's worth noting that our anticipated targets commence at 1.2135 and, upon surpassing this, extend to 1.2030.

For today, the projected trading range lies between a support of 1.2050 and a resistance of 1.2200.



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