GBP/USD Price Forecast: Bullish outlook remains in play near 1.3450

GBP/USD trades with mild losses around 1.3450 in Tuesday’s early European session.
Positive view of the pair prevails above the 100-day EMA, but further consolidation looks favorable with neutral RSI indicator.
The immediate resistance level emerges at 1.3585; the first support level to watch is 1.3405.

Lallalit Srijandorn FXStreet

The GBP/USD pair edges lower to near 1.3450 during the early European session on Tuesday. The potential downside for the major pair might be limited after US President Donald Trump announced he was firing a Federal Reserve (Fed) Governor, Lisa Cook. This, in turn, might raise concerns over the Fed’s independence and undermine the US Dollar (USD) in the near term.

Technically, the constructive outlook of GBP/USD remains in place as the major pair is well-supported above the key 100-day Exponential Moving Average (EMA) on the daily chart. Nonetheless, further consolidation cannot be ruled out, with the 14-day Relative Strength Index (RSI) hovering around the midline. This displays the neutral momentum in the near term.

The first upside barrier emerges at 1.3585, the high of August 13. A decisive break above this level could pick up more momentum and aim for 1.3635, the upper boundary of the Bollinger Band. Further north, the next resistance level is seen at 1.3752, the high of July 2.

On the downside, the low of August 21 at 1.3405 acts as an initial support level for GBP/USD. A breach of this level could drag the major pair toward 1.3360, the 100-day EMA. The crucial contention level to watch is in the 1.3210-1.3200 zone, representing the lower limit of the Bollinger Band and the psychological level.

GBP/USD daily chart

Pound Sterling FAQs

What is the Pound Sterling?

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).

How do the decisions of the Bank of England impact on the Pound Sterling?

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.

How does economic data influence the value of the Pound?

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.

How does the Trade Balance impact the Pound?

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

Lallalit Srijandorn

FXStreet

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

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