GBP/USD Prediction: Bearish
- Data from the United Kingdom has been mixed, but the value of the pound has remained relatively high.
- The Fed is still anticipated to make a decision regarding interest rates before the Bank of England.
- In the coming week, there will be a lack of data, so keep an eye out for speakers from the central bank.
The past week saw mixed home-country economic readings for Sterling, and with few more in the coming days, it may be stuck between mulling them over and watching the US Dollar.
The Pound and London blue-chip stocks rose counterintuitively after the UK entered a technical recession in the fourth quarter of 2023. Such a backdrop made investors wonder how long interest rates could stay at sixteen-year highs.
The January rebound in domestic retail sales barely affected Sterling. That may be because the month before was so bad, or because investors want to see if 2024’s strong start is a blip or a trend. Some economists have boldly suggested that any recession will be short-lived.
Only the Gfk consumer confidence snapshot awaits UK economy watchers this week. However, markets will likely pay more attention to any signs of sales resilience.
Dollar markets will be watching the latest Federal Open Market Committee policy meeting minutes. Events may have overshadowed these, but the market still expects Stateside rate cuts by mid-year.
The US Dollar may lead GBP/USD this week. This week, that pair is trending lower from high levels, so it’s bearish.
Daily Chart of the GBP/USD Currency Pair Created with TradingView
Longer-term views of the daily chart are intriguing now. Since late November, a broad sideways trading range between 1.28137 and Fibonacci support at 1.24908 is closing in on an uptrend from September 2022 lows.
That still provides support below the market at 1.24397, but the trendline will be important next week.
Sterling bulls appear to be defending that range base at 1.24908 this year. The market gapped lower earlier this month, putting it under pressure this week. Perhaps notably, February 2 and 3’s sharp daily falls have not been recovered.
Markets are also approaching a downtrend line from July 12 highs. Sterling bulls face resistance at 1.27424 after several 2024 tests.
GBP/USD’s Relative Strength Index is neutral below 40 but has been falling since November. This suggests a market comfortable at current levels but prone to overselling.