GBP/USD Price Forecast: Bulls press toward 1.3600 as uptrend strengthens
- GBP/USD holds above the 50-day, 100-day and 200-day SMAs, supporting the bullish outlook.
- Positive RSI and MACD readings show that buyers retain control.
- The 1.3600 psychological mark acts as the next immediate hurdle for buyers.
GBP/USD edges higher on Monday as fading expectations of an imminent Federal Reserve (Fed) rate hike drag the US Dollar (USD) lower and lift the British Pound (GBP) to its highest level since May 12. At the time of writing, the pair trades around 1.3555, building on its late-July recovery after clearing several key moving averages.
The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, trades around 99.45 after touching 99.30, its lowest level since June 5.
Strategists at UOB Group concede that their recent shift to a neutral stance on GBP was “premature,” after the Pound “rose sharply, breaking above the major resistance at 1.3555 (high was 1.3561).” The subsequent topside break, while “not as decisive” as they would have preferred, is nonetheless “sufficient to indicate that the upward bias remains intact,” though UOB cautions that “any advance is expected to face firm resistance at 1.3600.” In their one to three-week horizon, they now judge that “only a breach of 1.3495 (‘strong support’ level) would indicate that GBP is not ready to move toward 1.3600.”
From a technical perspective, GBP/USD maintains a bullish bias as the pair holds above the 50-day, 100-day and 200-day Simple Moving Averages (SMAs).
The Relative Strength Index (RSI) on the daily chart stands at 64.9, showing firm bullish momentum without entering overbought territory. The Moving Average Convergence Divergence (MACD) indicator remains in positive territory, suggesting that buyers retain control of the near-term direction.
Meanwhile, the Average Directional Index (ADX) at 27.6 indicates that the underlying uptrend is gaining strength, supporting the constructive outlook while the pair holds above the moving-average cluster.
On the upside, immediate resistance is located at the 1.3600 psychological mark, followed by 1.3700. A sustained break above 1.3700 could open the door to a test of 1.3850, this year’s high.
On the downside, the 1.3500 psychological level offers initial support. The next demand zone lies between 1.3417 and 1.3378, where the key moving averages are clustered. A deeper correction could expose 1.3300, followed by 1.3150.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.