GBP/USD Price Forecast: Bullish outlook remains in play near 1.3500
- GBP/USD trades in negative territory near 1.3500 in Monday’s early European session.
- Positive view of the pair prevails above the 100-day EMA, but further consolidation looks favorable with a neutral RSI indicator.
- The immediate resistance level emerges near 1.3550; the first support level to watch is 1.3405.
The GBP/USD pair edges lower to around 1.3500 during the early European session on Monday, bolstered by a modest rebound in the US Dollar (USD). However, the potential downside for the major pair might be limited amid rising expectations that the US Federal Reserve (Fed) will lower interest rates this year following Friday’s downbeat US jobs report.
Technically, the constructive outlook of GBP/USD remains in play, with the price being well-supported above the key 100-day Exponential Moving Average (EMA) on the daily chart. However, further consolidation or temporary sell-off cannot be ruled out as the 14-day Relative Strength Index (RSI) hovers around the midline. This displays the neutral momentum in the near term.
The first upside barrier emerges at 1.3550, the high of September 1. A decisive break above this level could pick up more momentum and aim for 1.3584, the upper boundary of the Bollinger Band. Further north, the next resistance level is seen at 1.3752, the high of June 27.
On the downside, the low of August 21 at 1.3405 acts as an initial support level for GBP/USD. A breach of this level could drag the major pair toward 1.3381, the 100-day EMA. Extended losses could see a drop to 1.3333, the low of September 3.
GBP/USD daily chart
Pound Sterling FAQs
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, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact 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 may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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