Daily Price Outlook
During the European trading session, the GBP/USD currency pair found a mild bid around the 1.2494 level. However, buyers struggled to gain any strong momentum amid the combination of factors including risk aversion, tepid UK retail sales, and dampened Fed rate cut expectations that has pressured the GBP/USD pair.
This leaves the pair struggling for momentum, likely keeping it range-bound unless stronger economic catalysts emerge to drive price action.
US Dollar Strengthens Amid Positive Economic Data and Fed's Hawkish Stance, Weighing on GBP/USD
On the US front, the broad-based US dollar gained traction and remains bullish as the US Dollar Index (DXY) stays above 108.50. The US Dollar saw a boost following a rise in the 10-year US Treasury bond yield, which climbed by over 1% to 4.67%.
This increase signals shifting investor sentiment around the Federal Reserve’s interest rate outlook, with expectations leaning toward higher rates for longer.
The positive economic data from the US also played a role. On the data front, the ISM Services PMI for November surged to 54.1, beating expectations of 53.3, with the Prices Paid Index rising sharply to 64.4, indicating inflation pressures.
Meanwhile, the ISM Manufacturing PMI improved slightly to 49.3 in December, signaling some stability in the manufacturing sector. These figures suggest that the US economy remains resilient, further supporting the dollar’s strength.
In contrast, concerns about future economic policies under President-elect Trump, such as potential tariffs, and the Fed’s cautious approach toward rate cuts in 2025, have added uncertainty. This combination of factors, including persistent inflation, makes traders wary.
For the GBP/USD pair, the strong US dollar, driven by these factors, is likely to keep pressure on the Pound, with the pair remaining sensitive to any shifts in US economic or Fed policy outlooks.
UK Retail Sales Growth Unable to Lift GBP Amid Risk Aversion and Economic Concerns
On the data front, UK Like-For-Like Retail Sales rose by 3.1% for the year ending in December, showing positive growth. However, this good news wasn't enough to support the GBP. Despite the retail sales increase, the Pound struggled to gain momentum as market sentiment shifted toward risk aversion.
The risk-off mood was driven by weaker global economic outlooks and growing concerns about potential inflationary pressures. This, in turn, caused investors to pull back from riskier assets, limiting the Pound's upside potential.
GBP/USD – Technical Analysis
GBP/USD is trading at $1.24863, up 0.08% on the day, hovering just below the pivot point of $1.25034. The 4-hour chart highlights immediate resistance at $1.25601, followed by key levels at $1.26142 and $1.26639, indicating areas where bullish momentum may face challenges.
On the downside, immediate support is at $1.24349, with subsequent levels at $1.23624 and $1.23014, marking critical zones for potential bearish moves.
The RSI at 48 reflects neutral market sentiment, while the 50 EMA at $1.25028 is nearly aligned with the pivot point, suggesting a critical zone for price action.
A decisive break below $1.25029 could initiate selling pressure, with the first target at $1.24338. Conversely, a sustained move above $1.25601 may signal bullish momentum, targeting higher resistance levels.
Traders are advised to watch the $1.25034 pivot point closely. Selling below this level offers a favorable risk-to-reward setup, with a take-profit target of $1.24338 and a stop-loss at $1.25520.
However, a break above $1.25601 could attract buying interest, signaling potential upside toward $1.26142. Market participants should monitor economic releases and central bank statements for directional cues.
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