- GBP/USD is expected to rise to around 1.3540 during the early European session on Wednesday.
- The optimistic outlook for the pair is evident beyond the 100-day EMA, reinforced by bullish RSI indicators.
- Immediate resistance levels seem to be in the 1.3585-1.3600 range, while the first support to monitor is at 1.3496.
The GBP/USD pair is likely to trade strongly near 1.3540 in the early hours of Wednesday. Market participants are anticipating that the US Federal Reserve might lower borrowing costs during its meetings on September 16-17. Traders are also looking forward to the US Producer Price Index (PPI) data for August, which could help clarify the potential extent of any interest rate cuts from the Fed starting next week.
From a technical perspective, the favorable outlook for GBP/USD remains intact as it surpasses the significant 100-day exponential moving average (EMA) on the daily chart. Furthermore, being above the midline with a 14-day relative strength index (RSI) close to 66.50 suggests potential bullish momentum ahead.
A notable resistance area lies between 1.3585-1.3600—this reflects the upper limit of the Bollinger Band, prior highs from September 9, and key psychological levels. If the price breaks above this threshold decisively, it could gain momentum and target highs around 1.3632 seen on June 13. Looking further, the next resistance kicks in at 1.3752 from July 2.
GBP/USD Daily Chart
Pound Sterling FAQ
Pound Sterling (GBP), recognized as the oldest currency still in use since 886 AD, is the official currency of Britain. As of 2022, it ranks as the fourth most traded forex currency globally, constituting 12% of all forex transactions, with an average of $630 billion traded daily. The primary trading pair is GBP/USD, often called “cable,” accounting for 11% of FX trades, followed by GBP/JPY (3%) and EUR/GBP (2%). It is issued by the Bank of England (BOE).
The primary determinant of the pound’s value is the monetary policy set by the Bank of England. This policy revolves around achieving “price stability,” typically defined as maintaining an inflation rate around 2%. Adjusting interest rates is the main strategy. If inflation climbs too high, the BOE may increase rates, making loans more costly which could stabilize GBP. Conversely, if inflation is too low, hinting at sluggish economic growth, the BOE might lower rates to stimulate borrowing and spending.
Various economic indicators can influence the pound’s value. Metrics like GDP, manufacturing and services PMI, and employment figures are key. A robust economy can bolster the pound as it attracts foreign investment and may lead to higher interest rates from the BOE. On the other hand, poor economic data could negatively impact GBP.
An important measure for Pound Sterling is the trade balance, which reflects the difference between export earnings and import expenses. A country with popular exports benefits from increased foreign demand, strengthening its currency. Thus, a favorable trade balance typically enhances the pound, while a negative balance can weaken it.
