GBP/USD Price Forecast: GBP Rejected Below 61.8% Fibo, What’s Next?

• GfK Consumer Confidence declined to -14, against the predicted-18. It supported the British Pound, which limited the loss in GBP/USD.
• Federal Reserve Vice Chair, Richard Clarida, said that central banks in different countries might adopt similar policies to standard global shocks.
• GBP/USD’s immediate support is at the 1.3400 level and a breakout of it has the potential to drive the selling trend all the way to $1.3358.

The GBP/USD continues to consolidate in a narrow trading range between 1.3414 – 1.3418. The GBP/USD price forecast remains neutral to bearish as it got rejected below the 61.8% Fibonacci retracement point. Nonetheless, the GBP/USD pair is still under pressure at approximately 1.3418 at the time of publication. The day before, GBP/USD closed at $1.3452 after setting a high of $1.3511 and a low of $1.3407. It reversed its course and dropped for the session amid the renewed strength of the US dollar.

Refer to our trading guides to enhance your forex trading skills.

The strong dollar continues to weigh on GBP/USD

The US Dollar Index was high across the board and was strong against the British Pound. It was moving at around 96.24, which is its highest level since July 2020. The greenback closed its fourth consecutive week with gains on its hand and remained cheerful throughout Friday’s trading session. As a result, it put additional downward pressure on the currency pair GBP/USD.

A quick economic review

• On the data front, at 05:01 GMT, GfK Consumer Confidence declined to -14, against the predicted-18. It supported the British Pound, which limited the loss in GBP/USD. 

• At 12:00 GMT, retail sales had increased by 0.8%, versus the forecasted 0.5%, bolstering the British pound.

• The public sector net borrowing increased to 18.0 billion, against an expected 12.2 billion. Eventually, it weighed on the British pound and added to the GBP/USD loss.

FED Governor Christopher Waller underpins the dollar.

Many Fed officials kept supporting the local currency by giving bullish comments on Friday. The Federal Reserve Governor, Christopher Waller, said on Friday that the central bank should accelerate the pace of its reduction in bond purchases to provide more flexibility to raise interest rates from their near-zero level sooner than it currently expects. He supported the faster pace of tapering and more rapid accommodation removal in 2022 due to quick development in the labor market and deteriorating inflation data.

Furthermore, the Federal Reserve Vice Chair, Richard Clarida, also said that central banks in different countries might adopt similar policies to standard global shocks. He stated that central banks were not resistant to each other’s policies and said that US policies affect foreign economies, but equally, the shifts in other countries’ monetary policies could affect the US economy and even force the Federal Reserve to respond accordingly.

Both officials believed that the Fed should accelerate the pace of tapering bond purchases to increase the chances of a faster than expected rate hike, which added strength to the US dollar and dragged GBP/USD to the downside.

Manufacturing & Services PMI in highlights

As discussed in our EUR/GBP forecast, a flood of PMI business surveys due on Tuesday could finally persuade investors that the ECB is unlikely to boost interest rates next year.

With increased trade restrictions, rising inflation eating into profit margins, and China’s downturn, there’s a good chance the PMIs will fall much further, throwing another blow to the already battered euro.

Last but not least, the release of November PMIs on Tuesday may cause some volatility in the British pound. Sterling has been the only primary currency to retain its nerve in the face of the dollar’s recent onslaught, even reaching new post-pandemic highs against the euro.

GBP/USD price forecast: Daily technical levels

Support Resistance

1.3422 1.3451

1.3412 / 1.3470

1.3393 1.3481

Pivot Point: 1.3441

GBP/USD price forecast: GBP Rejected Below 61.8% Fibo

The GBP/USD pair displays a vague bias while trading at the 1.3432 level on the technical side. Overall, the GBP/USD is tossing in a consolidation phase, maintaining a narrow trading range of 1.3414 – 1.3418.

In the 4-hour timeframe, the GBP/USD pair surged to test the 61.8% Fibonacci retracement level at 1.3414. However, it failed to cross above this level and plunged to trade at the 1.3418 level.

The closing of a candle below this level suggests the odds of a bearish reversal in the GBP/USD. The downward trendline also extends significant resistance at the 1.3452 level in the same timeframe, supporting the potential selling trend.

On the bearish side, the GBP/USD’s immediate support is at the 1.3400 level. The breakout of 1.3400, on the other hand, has the potential to drive the selling trend all the way to the 1.3358 level. Furthermore, the RSI and MACD remain in a sell zone, respectively below 50 and 0. However, the 20 and 50 EMAs are signaling indecision among investors. It looks like traders are bracing to trade a series of manufacturing and services PMI figures.

Consider taking a sell position below 1.3400, with immediate targets at 1.3358 and 1.3283. Alternatively, the breakout of the 1.3455 level can help us secure a quick buy trade until 1.3508. Good luck, and stay tuned for more updates!