56217 January, 12, 12:55:37 PM

GBP/USD Weekly Forecast: Pound Sterling Consolidates Before the Next Leg Lower

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GBP/USD Weekly Forecast: Pound Sterling Consolidates Before a Potential Downturn

The Pound Sterling (GBP) has entered a corrective consolidation phase against the US Dollar (USD), remaining below 1.2700 for the third consecutive week. The currency pair is vulnerable heading into another holiday-shortened week, with a bearish channel and RSI below 50.00 suggesting further weakness.

Factors Influencing GBP/USD

  • Renewed US Dollar demand amidst geopolitical tensions and hawkish Fed commentary
  • Lackluster Pound Sterling performance despite hawkish remarks from Bank of England officials
  • Elevated risks of Japanese Yen intervention, limiting GBP/USD upside attempts
  • Easter Monday holiday and summer time shift in the UK creating a light week ahead

Technical Outlook for GBP/USD

  • A breakout below the 200-day SMA at 1.2589 could resume the correction from seven-month highs
  • Critical support levels at 1.2540 and 1.2500
  • Resistance at the 100-day and 50-day SMA confluence around 1.2660
  • Further resistance at the channel support-turned resistance at 1.2700

Key Economic Data and Events

United States:

  • Monday: S&P Global final Manufacturing PMI, ISM Manufacturing PMI
  • Tuesday: UK final Manufacturing PMI, US JOLTS Job Openings survey
  • Wednesday: ADP Employment Change data, ISM Services PMI report
  • Friday: Nonfarm Payrolls data, US weekly Jobless Claims data

Key Speakers:

  • Several Fed policymakers' speeches will continue to influence Fed interest rate expectations

Factors to Watch

  • GBP/USD's position within the bearish channel
  • Confirmation of a break below the 200-day SMA
  • Performance near the 1.2400 support level
  • Market reaction to economic data and speeches from Fed policymakers

Disclaimer: This analysis is for informational purposes only and should not be considered investment advice. The author is not responsible for any loss or damage incurred from using this analysis. Trading involves substantial risk, and traders should always conduct their own due diligence before making any trades.

Pound Sterling FAQs

What is the Pound Sterling?

The Pound Sterling (GBP) is the oldest currency in the world, dating back to 886 AD. It is the official currency of the United Kingdom and the fourth most traded unit for foreign exchange. Its key trading pairs are GBP/USD, GBP/JPY, and EUR/GBP.

How do Bank of England decisions impact the Pound Sterling?

Monetary policy decisions by the Bank of England are the most significant factor influencing the value of the Pound Sterling. The BoE's primary goal is to maintain price stability with an inflation rate around 2%. Interest rate adjustments are the main tool used to achieve this goal. Higher interest rates generally strengthen GBP by attracting foreign investment.

How does economic data influence the value of the Pound?

Economic data releases, such as GDP, Manufacturing and Services PMIs, and employment, can impact the value of the Pound Sterling. Strong economic indicators may encourage the BoE to raise interest rates, strengthening GBP. Conversely, weak data can lead to a decline in the Pound's value.

How does the Trade Balance impact the Pound?

The Trade Balance measures the difference between a country's exports and imports. A positive Trade Balance strengthens a currency due to increased demand for that country's goods. Conversely, a negative Trade Balance can weaken the currency.

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