GBP/USD Price Forecast: Seems vulnerable near 50% Fibo. level; US macro data awaited

The GBP/USD pair attracts some buying on Thursday and recovers a part of the previous day's losses to the 1.3425 region, or a nearly three-week trough. Spot prices hold steady above mid-1.3400s during the early part of the European session amid a softer US Dollar (USD), though any meaningful appreciation still seems elusive ahead of important US macro releases.

The final US Q2 GDP print, along with Durable Goods Orders and the usual Initial Weekly Jobless Claims data, will be published later today. The focus, however, will remain glued to the US Personal Consumption Expenditure (PCE) Price Index on Friday. The latter is seen as the Federal Reserve's (Fed) preferred inflation gauge and will play a key role in influencing expectations about the future rate-cut path, which, in turn, will drive the US Dollar (USD) and provide a fresh impetus to the GBP/USD pair.

In the meantime, the Fed's hawkish outlook, signaling the need for two more rate cuts this year amid concerns about a softening US labor market, keeps a lid on the overnight US Dollar (USD) rally to a two-week top and supports the GBP/USD pair. Traders are pricing in the possibility that the US central bank will lower borrowing costs again in October and December following the first rate reduction since December last week. However, Fed Chair Jerome Powell's cautious remarks help limit USD losses.

Powell said during the post-meeting press conference last Wednesday that the move to lower rates was a risk management cut. Powell added that he doesn't feel the need to move quickly on rates as risks to inflation remain tilted to the upside. Moreover, Powell said earlier this week that easing too aggressively could leave the inflation job unfinished and need to reverse course. Apart from this, rising geopolitical tensions could benefit the safe-haven Greenback and cap gains for the GBP/USD pair.

The British Pound (GBP), on the other hand, might struggle to attract buyers amid concerns over the UK’s fiscal outlook ahead of the Autumn budget in November. Moreover, the Bank of England (BoE) Governor reiterated on Wednesday that there will be further reductions in the bank rate. This might hold back the GBP bulls from placing aggressive bets and makes it prudent to wait for strong follow-through buying before confirming that the GBP/USD pair has bottomed out in the near term.

GBP/USD daily chart

Technical Outlook

The GBP/USD pair bounced off the 50% Fibonacci retracement level of the August-September rally, which should now act as a key pivotal point. A convincing break below the said support near the 1.3425 region will be seen as a fresh trigger for bearish traders. Given that oscillators on the daily chart have just started gaining negative traction, spot prices might then weaken below the 1.3400 mark and accelerate the fall towards the 1.3370-1.3365 zone, or the 61.8% Fibo. level. This is followed by the monthly swing low, around the 1.3335-1.3330 area, which, if broken, would set the stage for an extension of the downfall witnessed over the past two weeks or so, from the 1.3725 region, or an over two-week high touched last week.

On the flip side, any subsequent move up is likely to confront stiff resistance and remain capped near the 1.3500 psychological mark. The said handle coincides with the 38.2% Fibo. retracement level and should act as a strong barrier. However, a sustained move beyond could trigger a short-covering rally and lift the GBP/USD pair to the weekly swing high, around the 1.3535 region, en route to the 1.3585-1.3590 supply zone, or the 23.6% Fibo. retracement level. Some follow-through buying beyond the 1.3600 mark might shift the near-term bias in favor of bullish traders and pave the way for a further appreciating move.