GBP/USD Price Forecast: Defends 1.3200 as bears await two-week-old range breakdown
- GBP/USD gains some positive traction as USD bulls opt to take some profits off the table.
- The Fed’s hawkish stance and geopolitical uncertainties could help limit losses for the USD.
- The technical setup further warrants caution before positioning for any meaningful gains.
The GBP/USD pair attracts some dip-buyers near the 1.3200 mark during the Asian session on Tuesday, stalling the previous day's rejection slide from the 100-period Simple Moving Average (SMA) on the 4-hour chart. Spot prices, however, remain confined in a familiar range held over the past three weeks or so, warranting some caution before positioning for any meaningful appreciation.
The British Pound (GBP) gains some ground following the better-than-expected release of British Retail Consortium (BRC) Like-For-Like Retail Sales data. Moreover, comments from Bank of England (BoE) member Megan Greene, saying that she is worried about second-round inflation effects coming into play if the central bank fails to act soon, lend support to the GBP. Apart from this, a modest US Dollar (USD) profit-taking slide from an 18-month peak, which touched on Monday, turns out to be another factor acting as a tailwind for the GBP/USD pair.
Meanwhile, the downside for the USD seems cushioned amid the growing acceptance that the Federal Reserve (Fed) will raise borrowing costs again by the end of this year. Adding to this, inflation risks stemming from volatile energy prices remain supportive of elevated US bond yields. Furthermore, the geopolitical risk premium remains in play amid the US-Iran standoff and intensifying fighting between the Iran-backed Houthi group and the Saudi-led coalition in Yemen, which could limit losses for the safe-haven buck and cap the GBP/USD pair.
From a technical perspective, the range-bound price action might be categorized as a bearish consolidation phase against the backdrop of a fall from the August swing high. Moreover, spot prices hold beneath the 100-period Simple Moving Average (SMA) on the 4-hour chart, which suggests rallies could struggle while this barrier at 1.3255 remains intact amid subdued momentum indicators. The Relative Strength Index (RSI) is hovering just below the 50 line, and Moving Average Convergence Divergence (MACD) readings are marginally negative.
This, in turn, backs the case for an eventual breakdown below the trading range support near 1.3180. The subsequent fall would set the stage for an extension of the downfall from the August monthly swing high near 1.3675. On the top side, any attempted recovery is more likely to attract fresh sellers near the 100-SMA and fade ahead of the 1.3300 mark. A sustained break above the said handle would be needed to ease the current bearish tone and open the way toward higher levels.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
GBP/USD 4-hour chart
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.
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