- GBP/USD shows a slight gain of around 1.3440 in Monday’s Asian trading session.
- The pair maintains an optimistic tone above the 100-day EMA, though some consolidation might happen soon.
- Immediate resistance is identified at 1.3588, while initial support is at 1.3365.
During Monday’s Asian hours, GBP/USD managed a modest profit, nearly reaching 1.3440. This comes amid renewed optimism from trade agreements between the US and EU, which has sparked a global risk-on sentiment likely to benefit the Pound Sterling (GBP). Eyes will be on the US Federal Reserve’s interest rate decisions later this week, and no changes are anticipated.
From a technical standpoint, GBP/USD sustains a positive outlook on daily charts, with prices above the 100-day exponential moving average (EMA). However, some level of consolidation, or even short-term sell-offs, can’t be entirely dismissed, especially as the 14-day relative strength index (RSI) remains below the 43.25 midline.
The first notable target for reversal to monitor is seen at 1.3588 from July 24th. If profits extend, the pair could reach 1.3681, the peak from July 4th.
Meanwhile, initial support for GBP/USD sits at 1.3365, dating back to July 16th. Breaking below this could expose the lower end of the Bollinger band at 1.3330. Further downside to note would be around 1.3236, which marks the lowest point from May 8th.
GBP/USD Daily Chart
Pound Sterling FAQ
Pound Sterling (GBP) is the oldest currency still in use today (originated in 886 AD) and serves as the official currency of Britain. In 2022, it ranked as the fourth most traded currency worldwide, contributing to 12% of all forex transactions, with an average daily volume of $630 billion. The primary trading pair is GBP/USD, referred to as “cable,” while GBP/JPY or “dragon” is noted for traders, comprising 3% of trades along with EUR/GBP at 2%. The currency is issued by the Bank of England (BOE).
The value of sterling is primarily influenced by monetary policy set by the Bank of England. The BOE’s main focus is to achieve “price stability,” aiming for an inflation rate around 2%. To maintain this balance, they adjust interest rates. Higher rates can curb inflation by making borrowing costlier, typically supporting GBP as the UK becomes more appealing to investors. Conversely, if inflation dips too low, it may indicate slowing growth, prompting the BOE to consider lowering rates to encourage borrowing and investment.
Economic data also plays a significant role in the value of sterling. Indicators like GDP, manufacturing, services PMI, and employment rates directly impact GBP’s trajectory. A robust economy could attract foreign investment, potentially leading the BOE to hike interest rates, which would strengthen GBP. Weak economic data, on the other hand, could result in a depreciation of the currency.
Trade balance is another crucial indicator for the Pound. It reflects the difference between a country’s export income and import expenses over time. Strong demand for popular exports can enhance the currency’s strength, while a negative trade balance would typically weaken it.
