GBP/USD Price Forecast: Drops to two-month low, traders dump GBP on UK bond.
- GBP/USD is breaking below the 100-day SMA at 1.2975, with further declines possible if it closes below the 1.2900 mark.
- Key support is at 1.2885, with the 200-day SMA at 1.2807 as the next target for traders.
- Resistance appears at 1.2950/60, and RSI shows a bearish trend approaching oversold levels, which is a possibility to close the range.
Pound Sterling fell to a new two-month high of 1.2885 against the Greenback during the session, while UK Gilts rose strongly after the release of the budget. However, GBP/USD gained some ground but lost more than 0.30% and traded at 1.2918.
GBP/USD Price Forecast: Technical view
GBP/USD broke below the 100-day Simple Moving Average (SMA) at 1.2975, extending its losses below the rising channel support, opening the way for further declines.
Even if the 1.2900 figure is cleared, pound traders should reach a close for the day below it. In that result, the next support for GBP/USD would be 1.2885, the low of the day, followed by the 200-day SMA at 1.2807.
On the other hand, if buyers keep GBP/USD flowing above 1.2900, the first resistance would be the previous support around 1.2950/60 before the bulls can test 1.2999.
Oscillators favor further declines in GBP/USD, as the Relative Strength Index (RSI) deepened its fall into bearish territory, almost reaching oversold levels.
GBP/USD Price Chart – Daily
Pound Sterling Questions
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, responsible for 12% of all transactions, which is an average of $ 630 billion per day, according to 2022 data. Pairs its main trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or ‘Dragon’ as it is known to traders (3%), and EUR/GBP (2). %). The Pound Sterling is issued by the Bank of England (BoE).
One of the most important factors influencing the value of the Pound Sterling is the monetary policy made by the Bank of England. The BoE bases its decisions on whether it has achieved its main objective of “price stability” – a stable inflation rate of around 2%. Its main tool to achieve this is the adjustment of interest rates. When inflation is too high, the BoE will try to stabilize it by raising interest rates, making it more expensive for people and businesses to get credit. This is generally positive for GBP, as high interest rates make the UK a very attractive place for global investors to park their money. When inflation drops too much it is a sign of economic growth slowing down. In this scenario, the BoE will consider lowering interest rates to reduce debt so that businesses will borrow more money to invest in growth projects.
Data updates measure the health of the economy and can affect the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it can encourage the BoE to set interest rates, which will directly strengthen the GBP. Otherwise, if the economic data is weak, the Pound Sterling may fall.
Another important data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country receives from imports and what it spends on imports over a period of time. If a country produces a commodity that is in high demand, its currency will only benefit from the increased demand created by foreign buyers who want to buy this commodity. Therefore, a net positive Trade Balance strengthens the currency and vice versa for a negative balance.
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