GBP/USD Forecast: Buyers remain hesitant as key resistance stays intact

GBP/USD has been struggling to find direction early Thursday.
Dollar holds its ground after suffering heavy losses earlier in the week.
February US PCE inflation data could impact market pricing of a 50 bps Fed hike in May.

Eren Sengezer FXStreet

GBP/USD has snapped a five-day losing streak on Wednesday but has been having a difficult time making a decisive move in either direction early Thursday. Although the near-term technical outlook points to a neutral bias, the pair's failure to clear the 1.3160 resistance could be seen as a bearish sign.

The selling pressure surrounding the greenback allowed GBP/USD to edge higher on Wednesday but the negative shift witnessed in risk sentiment in the second half of the day forced the pair to turn south. The latest headlines surrounding the Russia-Ukraine conflict suggested that sides were not as close to finding a diplomatic solution as officials' comments suggested following Tuesday's negotiations.

The cautious market environment, as reflected by the small losses in the UK's FTSE 100 Index, in the early European session is not allowing the British pound to attract investors.

In the second half of the day, the Personal Consumption Expenditures (PCE) Price Index data from the US will be watched closely by market participants. The CME Group FedWatch Tool's probability of a 50 basis points rate hike in May currently stands at 64%, down from 70% earlier in the week. Unless the data unveils a surprising slowdown in PCE inflation, investors could continue to price an aggressive policy tightening and help the dollar regain its strength.

GBP/USD Technical Analysis

GBP/USD faces stiff resistance at 1.3160 (Fibonacci 38.2% retracement of the latest downtrend, 50-period SMA). In case the pair makes a four-hour close above that level and starts using it as support, buyers could show interest. 1.3200 (psychological level, Fibonacci 50% retracement) and 1.3260 (Fibonacci 61.8% retracement) align as next bullish targets.

On the downside, the first support is located at 1.3100 (psychological level, Fibonacci 23.6% retracement) ahead of 1.3050 (static level).

Meanwhile, GBP/USD trades slightly below the 100-period SMA on the four-hour chart and the Relative Strength Index (RSI) indicator edges lower, confirming buyers' hesitancy.

Premium

You have reached your limit of 3 free articles for this month.

Start your subscription and get access to all our original articles.

Subscribe to Premium Sign In

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

EUR/USD accelerates losses, focus is on 1.1800

EUR/USD’s selling pressure is gathering pace now, opening the door to a potential test of the key 1.1800 region sooner rather than later. The pair’s pullback comes on the back of marked gains in the US Dollar following US data releases and the publication of the FOMC Minutes later in the day.

GBP/USD turns negative near 1.3540

GBP/USD reverses its initial upside momentum and is now adding to previous declines, revisiting at the same time the 1.3540 region on Wednesday. Cable’s downtick comes on the back of decent gains in the Greenback and easing UK inflation figures, which seem to have reinforced the case for a BoE rate cut in March.

Gold picks pace, flirts with $5,000

Gold is back on the front foot on Wednesday, shaking off part of the early week softness and pushing higher towards the key $5,000 mark per troy ounce. The move comes ahead of the FOMC Minutes and is unfolding despite an intense rebound in the US Dollar.

Fed Minutes to shed light on January hold decision amid hawkish rate outlook

The Minutes of the Fed’s January 27-28 monetary policy meeting will be published today. Details of discussions on the decision to leave the policy rate unchanged will be scrutinized by investors.

Mixed UK inflation data no gamechanger for the Bank of England

Food inflation plunged in January, but service sector price pressure is proving stickier. We continue to expect Bank of England rate cuts in March and June. The latest UK inflation read is a mixed bag for the Bank of England, but we doubt it drastically changes the odds of a March rate cut.

Sui extends sideways action ahead of Grayscale’s GSUI ETF launch

Sui is extending its downtrend for the second consecutive day, trading at 0.95 at the time of writing on Wednesday. The Layer-1 token is down over 16% in February and approximately 34% from the start of the year, aligning with the overall bearish sentiment across the crypto market.