GBP/USD Forecast: Technicals fail to provide a directional clue
Premium|Take advantage of 50% OFF on your first month.
Start your subscription and get access to all our original articles.
You have reached your limit of 5 free articles for this month.
Get Premium without limits for only $9.99 for the first month
Access all our articles, insights, and analysts.
UNLOCK OFFER- GBP/USD has declined below 1.2400 following Thursday's mixed action.
- Pound Sterling holds above key support levels but buyers remain hesitant.
- PCE inflation in the US is expected to edge lower in December.
GBP/USD has lost its traction and declined below 1.2400 early Friday. As markets await the December Personal Consumption Expenditures (PCE) Price Index data from the US, the pair could stay in a consolidation phase amid mixed technical signals.
The stronger-than-expected fourth-quarter Gross Domestic Product (GDP) data from the US allowed the US Dollar hold its ground against its rivals late Thursday. With Wall Street's main indexes extending the bullish rally, however, risk flows helped GBP/USD limits its losses.
Nevertheless, the cautious market mood in the European morning, as reflected by modest losses in the US stock index futures, makes it difficult for GBP/USD to gather bullish momentum.
The Core PCE Price Index, the Federal Reserve's (Fed) preferred gauge of inflation, is forecast to rise 0.3% on a monthly basis in December and the annual rate is expected to decline to 4.4% from 4.7% in November. Even if the data confirms further softening of price pressures in December, the US Dollar could manage to keep its footing. The CME Group FedWatch Tool suggests that two 25 basis points Fed rate hikes in February and March are nearly fully priced in. Considering the fact that PCE inflation is a lagging data, the market reaction is likely to remain short-lived.
On the flip side, an unexpected increase in the annual Core PCE inflation figure could trigger a rebound in the US Dollar Index and weigh on GBP/USD with markets readjusting their positions ahead of next week's FOMC meeting.
Meanwhile, Reuters reported that UK Treasury Secretary Jeremy Hunt will say on Friday that they will tackle the country's weak productivity growth by using post-Brexit finance reforms to drive more investment. Markets are unlikely to pay much attention to UK political developments unless they are about EU-UK Brexit negotiations.
GBP/USD Technical Analysis
GBP/USD dropped below the ascending regression channel coming from early January but bears failed to drag the price below the 20-period Simple Moving Average on the four-hour chart. Additionally, the Relative Strength Index (RSI) indicator on the same chart holds near 50, reflecting the pair's indecisiveness.
In case GBP/USD makes a four-hour close below 1.2360, where the 20 and the 50-period SMAs align, it could extend its slide toward 1.2300 (psychological level, static level) and 1.2250 (100-period SMA).
On the upside, buyers could show interest if GBP/USD returns within the ascending channel by rising above 1.2400 and stabilizing there. In that case, additional gains toward 1.2430 (mid-point of the ascending channel, static level) and 1.2450 (static level) could be witnessed.
- GBP/USD has declined below 1.2400 following Thursday's mixed action.
- Pound Sterling holds above key support levels but buyers remain hesitant.
- PCE inflation in the US is expected to edge lower in December.
GBP/USD has lost its traction and declined below 1.2400 early Friday. As markets await the December Personal Consumption Expenditures (PCE) Price Index data from the US, the pair could stay in a consolidation phase amid mixed technical signals.
The stronger-than-expected fourth-quarter Gross Domestic Product (GDP) data from the US allowed the US Dollar hold its ground against its rivals late Thursday. With Wall Street's main indexes extending the bullish rally, however, risk flows helped GBP/USD limits its losses.
Nevertheless, the cautious market mood in the European morning, as reflected by modest losses in the US stock index futures, makes it difficult for GBP/USD to gather bullish momentum.
The Core PCE Price Index, the Federal Reserve's (Fed) preferred gauge of inflation, is forecast to rise 0.3% on a monthly basis in December and the annual rate is expected to decline to 4.4% from 4.7% in November. Even if the data confirms further softening of price pressures in December, the US Dollar could manage to keep its footing. The CME Group FedWatch Tool suggests that two 25 basis points Fed rate hikes in February and March are nearly fully priced in. Considering the fact that PCE inflation is a lagging data, the market reaction is likely to remain short-lived.
On the flip side, an unexpected increase in the annual Core PCE inflation figure could trigger a rebound in the US Dollar Index and weigh on GBP/USD with markets readjusting their positions ahead of next week's FOMC meeting.
Meanwhile, Reuters reported that UK Treasury Secretary Jeremy Hunt will say on Friday that they will tackle the country's weak productivity growth by using post-Brexit finance reforms to drive more investment. Markets are unlikely to pay much attention to UK political developments unless they are about EU-UK Brexit negotiations.
GBP/USD Technical Analysis
GBP/USD dropped below the ascending regression channel coming from early January but bears failed to drag the price below the 20-period Simple Moving Average on the four-hour chart. Additionally, the Relative Strength Index (RSI) indicator on the same chart holds near 50, reflecting the pair's indecisiveness.
In case GBP/USD makes a four-hour close below 1.2360, where the 20 and the 50-period SMAs align, it could extend its slide toward 1.2300 (psychological level, static level) and 1.2250 (100-period SMA).
On the upside, buyers could show interest if GBP/USD returns within the ascending channel by rising above 1.2400 and stabilizing there. In that case, additional gains toward 1.2430 (mid-point of the ascending channel, static level) and 1.2450 (static level) could be witnessed.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.