GBP/USD Price Forecast – Why 1.3150 Could Drive a Downtrend?

• GBP/USD benefited from better-than-expected final UK GPD figures, showing growth of 1.3 percent.
• GBP/USD plunged below 1.3200 following stronger than expected US Nonfarm payroll figures.
• US Dollar Index is up 0.43 percent at 98.256, indicating that the US currency remains strong.

The GBP/USD price forecast remains bearish as it failed to stop its early-day downward rally on Friday. The direct pair drew some further offers around the 1.3117 round-figure mark in reaction to the Bank of England’s soft tone. The perception that the Bank of England is not in a hurry to raise interest rates keeps the GBP/USD bearish, as does broad-based US dollar strength.

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GBP/USD Fundamental Outlook

The GBP/USD pair benefited from a better-than-expected final UK GPD print on Thursday. It’s revealed that the economy grew by 1.3 percent in Q4 2021, versus the 1.0 percent forecast. However, the gains were short-lived as the USD built on the previous day’s impressive recovery from a nearly two-week low. The pair received some support from receding hopes for a de-escalation in the Ukraine conflict.

Furthermore, expectations that the Fed would adopt a more aggressive policy stance in order to combat persistently high inflation were viewed as a critical factor in the US dollar’s rise. The GBP/USD pair is currently trading at 1.3118 and is consolidating in the range of 1.3113 to 1.3152.

Geopolitical Tensions: Russia-Ukraine in Play

The market is still dominated by the ongoing conflict between Russia and Ukraine. Russia’s President Vladimir Putin signed legislation establishing natural gas trading procedures, including rouble payments and the possibility of new transactions in euros and dollars. Current contracts will be terminated if requests are not met. As a result, US equities are losing ground in the North American session, with Wall Street expected to open on a downbeat note. The S&P 500, Dow Jones Industrial Average, and tech-heavy Nasdaq Composite are all down 0.30 to 0.43 percent, with the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite all sitting at 4,576.32, 35075.94, and 15,014.01, respectively.

Stronger dollar to keep GBP/USD Bearish

Meanwhile, the dollar surged as a result of the news. The US Dollar Index is up 0.43 percent at 98.256, indicating that the US currency remains strong. The USD extended its solid recovery from a nearly two-week low the day before, aided by receding hopes for a de-escalation in the Ukraine conflict. In addition, the idea that the Fed would take a more aggressive stance to deal with rising inflation helped the greenback.

Markets have also factored in a 100 basis point rate hike over the next two policy meetings. The US Core PCE Price Index increased to 5.4 percent yearly in February, up from 5.2 percent the previous month, bolstering expectations.

The GBP/USD pair, on the other hand, has struggled to build on this week’s goodish bounce from the mid-1.3000s. It prolonged its sideways price movement for the second day in a row. The British pound benefited following Thursday’s final UK GPD print release. The economic data revealed that the economy grew by 1.3 percent in Q4 2021, versus the 1.0 percent forecast. However, the Bank of England’s dovish tone on the need for more interest rate hikes, combined with broad-based US dollar strength, prevented the GBP/USD pair from making any significant gains.

The underlying background favors USD bulls, but investors were cautious about placing aggressive positions, preferring to stay on the sidelines ahead of the US monthly jobs report. The widely anticipated NFP report, released later in the early North American session, will impact the Fed’s monetary policy outlook. Apart from that, developments in the Russia-Ukraine story will drive the USD and provide the GBP/USD pair with a new lease on life.

GBP/USD Price Forecast – Daily Technical Levels

Daily Support and Resistance

S3 1.3055
S2 1.30908
S1 1.31047
Pivot Point 1.31266
R1 1.31405
R2 1.31624
R3 1.31982

GBP/USD 4-Hour Chart -Upward Trendline in Play

GBP/USD Price Forecast – Technical Outlook

The GBP/USD plunged below 1.3200 following stronger than expected US Nonfarm payroll figures. During the European session, it fell further toward 1.3150 due to a negative shift in risk sentiment. The 50-period and 100-period SMAs appear to have formed strong support at 1.3160 on the four-hour chart.

This level is reinforced by the Fibonacci 38.2 percent retracement of the most recent downtrend. If sellers drag the pair below that level, bearish targets at 1.3130 (static level) and 1.3100 will be reached.

Buyers will be bullish if they can convert 1.3200 (psychological level, Fibonacci 50% retracement, 20-period SMA) into support. As a result, the GBP/USD could extend its rally to 1.3260. (Fibonacci 61.8 percent retracement).

Meanwhile, the Relative Strength Index (RSI) indicator has crossed above 50, indicating that bullish momentum is building. The 50 EMA is expected to provide additional support at the 1.3150 level, and a break of this level could expose the pair to 1.3096. Closing candles above 1.3150 can push the price up to 1.3220, and vice versa.

Good luck, and stay tuned for more updates!