GBP/USD Price Forecast: Downward Trendline to Drive Sell Under $1.3080
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- GBP/USD pair is trading at 1.3045 and consolidating in the range between 1.3010 and 1.3053.
- Lockdown in the 17.5 million-strong Shenzhen city contributes to the gloomy market atmosphere.
- GBP/USD is trapped within a larger bearish trend following a three-week sell-off.
During the late European session, the GBP/USD price forecast remained bearish as the pair managed to extend its early-day modest upward rally. It staged a modest bounce around the 1.3050 level. The GBP/USD currency pair opened cautiously bullish, indicating that the cable would see some power-pack action this week.
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US FOMC and Fed Funds Rate in Highlights
The Federal Reserve’s (Fed) pronouncement of monetary policy will keep greenback sellers on their feet. In the meantime, investors anticipate another interest rate hike from the Bank of England (BOE). Following two hikes of 25 basis points (bps) apiece in December and February.
The Bank of England was the first central bank to raise interest rates after the COVID-19 pandemic. Meanwhile, upbeat UK macro data from the previous week bolstered the pound. It contributed to the GBP/USD currency pair’s gains.
Russia Ukraine Geopolitical Tensions in Play
Apart from this, the renewed prospects for a diplomatic settlement to the Russia-Ukraine crisis boosted stock markets. Hence, it weakened the safe-haven US currency. The GBP/USD pair received a boost as a result of this.
At this time, the GBP/USD pair is trading at 1.3045 and consolidating in the range between 1.3010 and 1.3053. The latest optimism is spurred by Russian President Vladimir Putin’s comments that there have been some good shifts in discussions with Ukraine. Consequently, this boosted the market’s sentiment even more.
Markets are taking the burden of a deadly Russian attack on a Ukrainian military base near the Polish border. Despite the positive assessment and apparent progress in discussions between Russian and Ukrainian officials over the weekend.
Early Sunday, according to the local governor, Russia fired roughly 30 cruise missiles at the base outside of Lviv. At least 35 people died in the strike on the Yavoriv training base.
As we know, things have altered radically since Russia’s invasion of Ukraine, with natural gas and oil prices skyrocketing, and the level of inflation in the pound area is likely to exceed the BOE’s February forecasts. The likelihood of another interest rate hike by the BOE has increased as a result of this.
Lockdown in China Continues to Gloom the Market
The gains in market sentiment could be temporary as China’s COVID revival. Lockdown in the 17.5 million-strong Shenzhen city contributes to the gloomy market atmosphere. Due to COVID-19 shutdown procedures, Toyota has announced a production halt in Changchun, China. FoxCon has paused production at its iPhone factory in Shenzhen.
GBP/USD Fundamentals Analysis
The previously reported upbeat UK macro data, on the other hand, tend to support the GBP currency. The UK economy rose by 0.8 percent in January, exceeding market expectations, according to the monthly GDP report issued the previous week. In addition, industrial output increased by 0.7 percent month over month in January, owing to a 0.8 percent increase in manufacturing output. Furthermore, output in the services sector climbed by 0.8 percent in the reported month, compared to a 0.5 percent drop in December. The news helped the British pound because it made people think the Bank of England will raise interest rates at its meeting next week.
For now, investors are waiting for the release of the retail sales m/m and the FOMC Statement to provide some momentum. However, the focus will stay on the latest geopolitical stories and developments in the Russia-Ukraine conflict. This would have an effect on general risk sentiment and the price of the dollar, allowing traders to make money from the GBP/USD pair.
GBP/USD Price Forecast – Daily Technical Levels
S3 1.29521
S2 1.2993
S1 1.30182
Pivot Point 1.30339
R1 1.30591
R2 1.30748
R3 1.31157
GBP/USD Price Forecast – Technical Outlook
The GBP/USD is trapped within a larger bearish trend following a three-week sell-off. The pair has fallen nearly 5% from late February highs of 1.3640 to trade just above the psychological level of 1.3000 for the first time since November 2020.
On Monday, the pound saw a moderate increase in demand, aided by a slightly weaker dollar and a mild improvement in sentiment due to Russia-Ukraine peace talks. Aside from that, investors’ expectations that the Bank of England will raise interest rates at its meeting next Thursday have been supportive of the GBP.
The interim resistance level for the GBP/USD is 1.3050. (static level). If a four-hour candle closes above that level, the pair may extend its recovery to 1.3100 (20-period SMA on the four-hour chart, static level) and 1.3150. (static level).
1.3000 (psychological level) corresponds to critical support on the negative side. The next bearish target could be 1.2920 (static level) if that level becomes resistance. Meanwhile, the four-hour chart’s Relative Strength Index (RSI) indicator is still below 50, indicating that the pair is still in a corrective phase.
Good luck, and stay tuned for more updates!
