- GBP/USD is projected to show a slight loss around 1.3450 in the early hours of the European session on Tuesday.
- Despite a generally positive outlook for the pair beyond the 100-day EMA, further integration seems to be the preference as the RSI indicators sit around neutral levels.
- The immediate resistance level is identified at 1.3585, while initial support is observed at 1.3405.
In the early European session on Tuesday, the GBP/USD pair is likely to dip to about 1.3450. The possible weaknesses in this major currency pair might be somewhat contained following President Trump’s announcement regarding the dismissal of Federal Reserve Governor Lisa Cook. This move could spark concerns over the independence of the Federal Reserve and possibly weaken the US dollar in the short term.
From a technical perspective, the optimistic outlook for GBP/USD persists, with the pair surpassing the significant 100-day exponential moving average (EMA) on the daily chart. However, it’s worth considering that further consolidation cannot be entirely ruled out, as the 14-day relative strength index (RSI) hovers around the midpoint—suggesting neutral momentum.
The first notable resistance appears at 1.3585, which marked a high on August 13. A decisive breakthrough beyond this point may build additional momentum and target the upper boundary of the Bollinger band, approximately located at 1.3635. Further down the line, resistance is noted at a July 2 high of 1.3752.
On the flip side, the most recent low of 1.3405 from August 21 serves as the initial support level for GBP/USD. If this level is breached, it may pull the pair down towards its 100-day EMA at 1.3360. Additionally, key areas of interest lie between 1.3210 and 1.3200, which represent both the lower bounds of the Bollinger band and a psychological threshold.
GBP/USD Daily Chart
Pound Sterling FAQ
Pound Sterling (GBP) is the world’s oldest currency, dating back to 886 AD, and serves as the official currency of the UK. As of 2022, it’s the fourth most traded currency, accounting for about 12% of all transactions, with a daily average of $630 billion. The primary trading pair is GBP/USD, also called “cable,” which makes up 11% of FX transactions, along with GBP/JPY, known as “dragon” (3%), and EUR/GBP (2%). The Bank of England (BOE) issues Pound Sterling.
The value of sterling is mainly influenced by the monetary policy established by the Bank of England. The BOE aims for price stability, targeting an inflation rate of around 2%. By adjusting interest rates, the BOE attempts to manage inflation. An increase might be employed to cool off rising prices, making the UK a more appealing destination for global investors. Conversely, if inflation is low and growth slows, the BOE may lower rates to spur borrowing and investment.
Various data points reflect the economic health of the UK, impacting the value of the pound. Metrics like GDP, manufacturing, services PMI, and employment figures can sway the direction of GBP. A robust economy tends to attract investments, leading to possible rate hikes from the BOE, directly benefiting GBP. On the other hand, if the economic data is underwhelming, the pound could suffer.
Another key indicator for Pound Sterling is the trade balance, which assesses the difference between a country’s export earnings and its spending on imports. Strong exports tend to attract demand, positively influencing the currency. A favorable net trade balance typically strengthens the currency, while a negative one can have the opposite effect.
