GBP/USD Price Forecast: Strives to hold key 20-day EMA
- GBP/USD consolidates around 1.3400 as Israel’s continued attacks on Lebanon renew Middle East war uncertainty.
- Iran’s Qalibaf warns that the US has violated three clauses of the 10-point proposal.
- Investors await the US CPI data for March, which will be released on Friday.
The Pound Sterling trades in a tight range around 1.3400 against the US Dollar (USD) during the Asian trading session on Thursday. The GBP/USD pair consolidates as investors doubt over the sustainability of the ceasefire between the United States (US) and Iran on early Wednesday in the wake of continued attacks by Israel on Iran-backed Hezbollah in Lebanon.
In response, Iran’s parliament speaker and chief negotiator, Mohammad Bagher Qalibaf, said in a post on X, formerly known as Twitter, that it would be “unreasonable” to continue permanent ceasefire talks with the US as it has violated three clauses of the 10-point proposal so far.
This has renewed fears of a prolonged war in the Middle East, weighing on risk-sensitive assets. As of writing, S&P 500 futures are down 0.2% to near 6,770. Meanwhile, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades marginally higher to near 99.05.
On the macro front, investors await the US Consumer Price Index (CPI) data for March, which will be released on Friday. The data is expected to show that the headline CPI grew at a faster pace of 3.3% Year-on-Year (YoY) against the prior reading of 2.4%.
GBP/USD technical analysis
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GBP/USD trades sideways around 1.3400 in Thursday's Asian session. The pair holds a modest bullish bias as spot remains above the 20-day Exponential Moving Average (EMA) at 1.3325, suggesting downside attempts would be absorbed near that dynamic floor.
The 14-day Relative Strength Index (RSI) near 54 leans slightly positive, hinting that buyers retain the near-term initiative while momentum improves gradually.
On the downside, immediate support is located at the 20-day EMA around 1.3325, where a break would weaken the constructive tone and expose a deeper pullback. With no nearby technical resistances from the provided dataset, further gains would likely meet selling interest at prior swing highs on the broader chart, though the current structure leaves the path of least resistance tilted to the upside as long as price holds above the 1.3325 area.
(The technical analysis of this story was written with the help of an AI tool.)
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
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