GBP/USD Forecast: Technicals point to buildup in bearish pressure
- GBP/USD trades in negative territory below 1.3500 early Wednesday.
- The technical outlook highlights a buildup of bearish momentum in the short term.
- The pair could extend its slide once 1.3470 support fails.
GBP/USD stays under bearish pressure in the European session on Wednesday and trades below 1.3500. The technical outlook shows that sellers could retain control in the near term.
Pound Sterling Price Today
The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the weakest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.38% | 0.36% | 0.43% | 0.19% | -0.23% | 0.26% | 0.34% | |
| EUR | -0.38% | -0.03% | 0.05% | -0.19% | -0.60% | -0.12% | -0.04% | |
| GBP | -0.36% | 0.03% | 0.04% | -0.16% | -0.51% | -0.10% | -0.05% | |
| JPY | -0.43% | -0.05% | -0.04% | -0.25% | -0.64% | -0.25% | -0.10% | |
| CAD | -0.19% | 0.19% | 0.16% | 0.25% | -0.38% | 0.05% | 0.16% | |
| AUD | 0.23% | 0.60% | 0.51% | 0.64% | 0.38% | 0.47% | 0.57% | |
| NZD | -0.26% | 0.12% | 0.10% | 0.25% | -0.05% | -0.47% | 0.12% | |
| CHF | -0.34% | 0.04% | 0.05% | 0.10% | -0.16% | -0.57% | -0.12% |
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 British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
The US Dollar (USD) benefited from the risk-averse market environment and the Purchasing Managers' Index (PMI) data for September, which showed that the business activity in the private sector expanded at a healthy pace, in the second half of the day on Tuesday, not allowing GBP/USD to gather recovery momentum.
Additionally, Federal Reserve (Fed) Chairman Jerome Powell said that they will look at the labor market, growth, and inflation data to assess if the policy is in the right place by the next meeting. His cautious comments on further policy-easing also supported the USD.
Early Wednesday, the USD continues to gather strength against its peers and forces GBP/USD to stay on the back foot.
The US economic calendar will not offer any high-tier data releases on Wednesday. Hence, the risk perception could influence the USD's valuation and drive GBP/USD's action later in the day. A bearish opening in Wall Street is likely to boost the USD and cause the pair to continue to stretch lower.
GBP/USD Technical Analysis
GBP/USD failed to stabilize above the 100-period and the 200-period Simple Moving Averages (SMAs) on the 4-hour chart and the Relative Strength Index (RSI) declined below 40, reflecting a bearish stance.
The Fibonacci 38.2% retracement level and the 50-day SMA forms a strong support at 1.3470. In case GBP/USD drops below this level and starts using it as resistance, technical sellers could remain interested. In this scenario, 1.3410-1.3400 (Fibonacci 50% retracement, round level) could be seen as the next support level before 1.3350 (Fibonacci 61.8% retracement).
On the upside, resistance levels could be spotted at 1.3510-1.3525 (200-period SMA, 100-period SMA), 1.3550 (Fibonacci 23.6% retracement) and 1.3600 (static level, round level).
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.
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.
