GBP/USD Forecast: Pound Sterling trades near key resistance
- GBP/USD posted small gains on Monday after the bearish action seen at the weekly opening.
- Technical buyers could take action if GBP/USD clears 1.2450 resistance.
- The pair's upside could remain capped if investors turn cautious later in the day.
After falling to a two-week-low of 1.2250 early Monday, GBP/USD reversed its direction and closed the day marginally higher. Early Tuesday, the pair trades in a narrow channel, slightly below 1.2450.
US Dollar PRICE This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Euro.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.23% | -0.23% | 0.20% | -1.83% | 0.08% | -0.25% | -0.69% | |
| EUR | -0.23% | -0.06% | 1.28% | -0.77% | 0.31% | 0.83% | 0.38% | |
| GBP | 0.23% | 0.06% | 0.25% | -0.71% | 0.38% | 0.90% | 0.44% | |
| JPY | -0.20% | -1.28% | -0.25% | -2.04% | 0.02% | 0.46% | -0.27% | |
| CAD | 1.83% | 0.77% | 0.71% | 2.04% | 0.84% | 1.61% | 1.16% | |
| AUD | -0.08% | -0.31% | -0.38% | -0.02% | -0.84% | 0.51% | 0.06% | |
| NZD | 0.25% | -0.83% | -0.90% | -0.46% | -1.61% | -0.51% | -0.45% | |
| CHF | 0.69% | -0.38% | -0.44% | 0.27% | -1.16% | -0.06% | 0.45% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
The improving risk mood in the second half of the day on Monday forced the US Dollar (USD) to erase its daily gains, helping GBP/USD stage a decisive rebound.
Canadian Prime Minister Justin Trudeau said that US President Donald Trump has agreed to postpone tariffs on Canadian imports for at least 30 days. Additionally, Mexico's President Claudia Sheinbaum announced that the US will pause tariffs on Mexican imports for 30 days, allowing investors to breathe a sigh of relief.
Early Tuesday, US stock index futures trade modestly lower on the day, suggesting that investors refrain from putting themselves in a position for a risk rally.
Later in the day, the US Bureau of Labor Statistics will publish JOLTS Job Openings data for December. Markets expect the number of job openings to stand around 8 million. A noticeable positive surprise with a reading at or above 8.5 million could boost the USD and drag GBP/USD lower.
GBP/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart rose slightly above 50 and GBP/USD stabilized above the ascending trend line, reflecting a lack of seller interest.
On the upside, 1.2450 (Fibonacci 50% retracement of the latest downtrend) aligns as first resistance before 1.2500 (round level, static level) and 1.2530 (Fibonacci 61.8% retracement). Looking south, supports could be spotted at 1.2400 (200-period Simple Moving Average (SMA)), 1.2370 (Fibonacci 38.2% retracement) and 1.2330 (100-period SMA, ascending trend line).
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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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.
