GBP/USD Price Forecast: BoE Rate Hike to Drive Uptrend Above $1.3200

• Bank of England (BOE) increased its policy rate by 25 basis points to 0.75 percent on Thursday.
• According to a Ukrainian presidential advisor, discussions with Russia are proceeding slowly.
• GBP/USD exchange rate was last seen trading below 1.3150. (Fibonacci’s 38.2 percent retracement of the latest downtrend).

The GBP/USD price forecast remains bullish above the 50 days EMA level of 1.3110 level. The GBP/USD pair continued on the defensive as the North American session began. The pair was last seen trading near the daily low, around 1.3120. The pair struggled to benefit from its early moderate gain on Friday instead of seeing a new supply near the 1.3180-1.3185 zone. It’s being pushed by several factors. The Bank of England’s dovish evaluation of its monetary policy decision was considered a crucial element. BoE policy decision worked as a headwind for the British pound. Aside from that, a slight increase in US dollar demand caused some intraday selling in the GBP/USD pair.

Bank of England (BOE) Rate Hike

After falling below 1.3100 on Thursday, GBP/USD attempted a rebound but lost momentum early Friday. The downward change in risk sentiment could weigh on the pair ahead of the weekend, dragging it toward the 1.3100 support level. The Bank of England (BOE) increased its policy rate by 25 basis points to 0.75 percent on Thursday, as predicted. Deputy Governor Jon Cunliffe, on the other hand, voted to keep rates unchanged. Hence, he prevented the British pound from benefiting from the rate increase. Additionally, the policy statement stated that the Russia-Ukraine conflict had “substantially heightened uncertainties about the economic outlook,” The bank’s cautious tone weighed on the GBP.

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The bullish market sentiment, as indicated by the robust advances in Wall Street’s major indexes, made it difficult for the dollar to find demand. Therefore, paving the way for a GBP/USD recovery. With the Federal Reserve and Bank of England policy meetings concluded, investors refocused their attention on the Russia-Ukraine crisis on the week’s final trading day.

Hawkish FOMC and Fed Rate Hike Priced-in

Aside from that, the Fed’s hawkish view, implying that interest rates could be raised at all six remaining meetings in 2022, bolstered the buck. The mix of supporting factors, to a greater extent, helped counter a lower tone in the equities markets while doing little to undermine the USD’s intraday bullish attitude. However, the lack of follow-through selling surrounding the GBP/USD pair should be considered by bearish traders.

Because of this and the overnight recovery, it is wise to wait for a decisive break of the 1.3100 level before positioning for any additional depreciation. The sustained weakness below will indicate that the recent strong recovery from the lowest level since November 2020 has peaked. Therefore, the GBP/USD pair might become vulnerable, allowing it to accelerate its decline and attack the psychological level of 1.3000, or the YTD low reached earlier this week.

Geopolitical Tensions Between Russia Ukraine in Highlights

According to a Ukrainian presidential advisor, discussions with Russia are proceeding slowly, and they have maintained that they would not negotiate a single inch of Ukrainian territory. US Secretary of State Antony Blinken suggested that Russia may be considering a chemical-weapon attack.

The lack of movement in the Russia-Ukraine peace talks has put the recent euphoria at bay, and investors’ desire for perceived riskier assets has waned. Traders appeared apprehensive ahead of a meeting between US Vice President Joe Biden and his Chinese counterpart Xi Jinping. This was reflected in a generally softer tone in the equities markets, which in turn provided some support to traditional safe-haven assets such as the US dollar.

Market players are now looking ahead to the US economic calendar, including the release of Existing Home Sales. However, the data may have little impact on USD price dynamics as the spotlight remains on new developments in the Russia-Ukraine conflict. Aside from that, the headlines from the Biden-Xi meeting may influence broader market risk sentiment and create some short-term trading opportunities around the GBP/USD pair.

Market participants may seek sanctuary at the end of the day due to the increased danger of the violence escalating further over the weekend. In that event, the dollar may continue to strengthen, pushing the  GBP/USD down.

GBP/USD Price Forecast – Daily Technical Levels

S3 1.30521
S2 1.3093
S1 1.3109
Pivot Point 1.31339
R1 1.3225
R2 1.3265
R3 1.3285

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

GBP/USD Price Forecast – Technical Outlook

The GBP/USD exchange rate was last seen trading below 1.3150. (Fibonacci’s 38.2 percent retracement of the latest downtrend). If this level is broken, the next bearish targets are at 1.3100 (Fibonacci 23.6 percent retracement, 50-period SMA on the four-hour chart) and 1.3050. On the other hand, if the GBP/USD pair is able to reclaim 1.3150 on the back of risk flows. It could rise toward 1.3200 (psychological level, Fibonacci 50% retracement).

The GBP/USD has formed a symmetrical triangle pattern that has the potential to break on the higher side. Moreover, the GBP/USD is likely to face the next resistance at the 1.3210 level. A breakout of this level could expose the cable towards the 1.3235 or 1.3285 level. Conversely, the support continues to hold at the 1.3110 level. Continuing the selling trend could push the GBP/USD pair price to the next support level of 1.3045 or 1.3002.

Meanwhile, the Relative Strength Index (RSI) indicator crosses above 50, which shows that the bullish momentum is getting stronger. Speaking of the lagging indicators, the 50 EMA will likely extend support at the 1.3109 level. Thus, the bullish bias dominates over 1.3110 and vice versa. 

Good luck, and stay tuned for more updates!