GBP/USD Falters Amidst Central Bank Anticipation; What Lies Ahead?

Posted Tuesday, September 19, 2023 by
Arslan Butt • 2 min read

The GBP/USD currency pair struggles to find momentum, hovering near its early June nadir, observed on Monday. Currently oscillating within the 1.2380-1.2375 bracket, the pair’s potential to extend its downward trend, ongoing for nearly two months, remains.

The British Pound’s (GBP) current woes can be attributed to growing predictions that the Bank of England (BoE) might be concluding its cycle of rate hikes. Conversely, the US Dollar (USD) remains restrained beneath a peak reached six months prior, acting as a buffer against more pronounced declines. With critical central bank events on the horizon – notably the FOMC announcement on Wednesday and the crucial BoE discussion on Thursday – traders are treading cautiously, refraining from significant commitments.

Technically, the pair’s recent descent along a declining channel underscores a pronounced short-term bearish phase. Compounding this sentiment was the breach below the pivotal 200-day Simple Moving Average (SMA) last week – a move not seen since March, emboldening bearish investors. The ensuing downturn, combined with the breach below the 1.2400 threshold, further solidifies the pessimistic stance. Coupled with bearish oscillations on daily charts, it appears the GBP/USD trajectory leans more towards decline.

A further dip to revisit the May lows around the 1.2310-1.2300 bracket seems plausible. This range aligns with the base of the descending channel mentioned, and a decisive break could magnify the bearish sentiment. The subsequent trajectory might lead the pair to the 1.2200 mark, potentially descending further to the supportive band of 1.2150-1.2140.

Conversely, a resurgence above 1.2400 would likely face formidable resistance around the 1.2430-1.2435 zone, or the 200-day SMA. Sustained momentum beyond this could catalyze a rebound, pushing GBP/USD towards the 1.2500 landmark. While this could inspire further upward movement, such a revival may be short-lived, potentially plateauing near the prior week’s apex at the 1.2545-1.2550 span.

This range is poised to be a crucial determinant for short-term investors.

A robust surge past this would suggest a potential inflection point for GBP/USD , indicating a possible shift from its bearish narrative. This might elevate the pair towards the 1.2600 landmark, aligning with the upper limit of the declining channel. Subsequently, the 100-day SMA hurdle, currently hovering around 1.2645, emerges as the next challenge. A decisive conquest of this could tilt the balance towards the bulls in the near term.

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