GBP/USD Holds Ground Around 1.2450 Despite Mixed Signals and Risk Factors

Posted Thursday, June 8, 2023 by
Arslan Butt • 2 min read

Buyers of the GBP/USD pair remain in control near the 1.2450 level, although the upward momentum has slowed as Thursday’s London session begins. The buyers are encouraged by diminishing chances of a June rate hike by the Federal Reserve, while early indications of the Bank of England’s interest rate guidance appear contradictory.

In recent news, a survey by the UK’s Recruitment and Employment Confederation (REC), funded by KPMG, revealed that the country’s labor market cooled further in May, with starting salaries for permanent staff increasing at the slowest pace in over two years. These results are particularly significant for GBP/USD traders as the recruiters surveyed are closely monitored by the Bank of England.

On the other hand, a survey conducted by the Royal Institution of Chartered Surveyors (RICS) suggests that the measure of new buyer inquiries improved to a less negative figure of -18, the highest since May 2022, compared to -34 in April, according to Reuters.

Additionally, UK Prime Minister Rishi Sunak’s diplomatic visit to the US failed to yield any significant accomplishments, which adds to the sentiment of GBP/USD buyers. The lack of progress on a UK-US free trade deal reinforces doubts surrounding promises made during the Brexit referendum.

Although there are negative factors, such as the latest report from the Organisation for Economic Co-operation and Development (OECD) stating that the global economy is expected to face a weak recovery in the coming years, the GBP/USD pair is ignoring these concerns. The OECD report also revised its UK growth forecast to 0.3% in 2023 and 1.0% in 2024, compared to -0.2% and 0.9% respectively in the previous outlook.

Looking ahead, the economic calendar in the UK and the US is relatively light, with only the weekly Initial Jobless Claims report expected to have some impact. Market participants should closely monitor risk-related catalysts and bond market movements for clearer direction.

Technical Outlook for GBP/USD

The GBP/USD pair has continued its upward movement, testing the resistance line at 1.1940. However, it remains stable below this level, and the presence of the EMA50 adds further strength to this resistance. The pair is expected to resume its corrective bearish wave, with its main target located at 1.1625.

The Stochastic indicator currently shows clear negative signals, indicating a potential decline in the upcoming sessions. The pair is following a bearish channel on the chart.

Therefore, our bearish view remains valid and active. It is important to note that breaching the levels of 1.1940 and 1.2020 would negate the expected decline and lead to a potential recovery.

The expected trading range for today is between support at 1.1820 and resistance at 1.1990.

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