Daily Price Outlook
During the European trading session, the GBP/USD pair struggled to gain positive momentum, staying relatively subdued around the 1.2223 mark and even dipping to an intra-day low of 1.2161.
This hesitation can largely be attributed to the cautious sentiment among investors, who are now focusing on the upcoming high-impact Consumer Price Index (CPI) data from both the UK and the US.
Another factor putting pressure on the GBP/USD pair is the recent surge in UK borrowing costs, which has contributed to a weakening outlook for the GBP. This has become a key factor weighing down the GBP/USD pair as investors remain wary of the potential impact on the UK economy.
On the flip side, the US Dollar (USD) is also struggling, lingering near its weekly low after softer US producer prices were released on Tuesday.
This slowdown in inflation has provided some relief to the dollar, limiting any significant downside moves for the GBP/USD pair.
As the market looks ahead to these important data releases, the currency pair is likely to remain in a state of uncertainty, with the next major price movement contingent on the outcomes of these economic reports.
GBP/USD Struggles Amid Rising UK Borrowing Costs and Fed's Hawkish Stance
On the GBP front, the recent rise in UK borrowing costs has created a negative sentiment around the British Pound.
This has become a key factor pressuring the GBP/USD pair, as higher borrowing costs can weigh on economic activity and investor confidence. As a result, the pound remains under pressure, struggling to recover strongly in the market.
Meanwhile, the US Dollar (USD) is hovering near its weekly low after weaker-than-expected US producer price data earlier this week.
This has limited further losses for the GBP/USD pair. However, the Federal Reserve’s increasingly hawkish stance is providing support for the dollar.
The Fed’s position suggests it may not reduce interest rates anytime soon, helping maintain higher US Treasury bond yields and boosting the dollar’s appeal.
Market participants are now confident that the Fed will pause its rate-cutting plans during its next meeting. This belief was reinforced by last Friday’s strong US Nonfarm Payrolls (NFP) report, which signaled a healthy job market.
These developments support USD bulls and suggest that any recovery attempt in the GBP/USD pair could face selling pressure, keeping gains limited. Traders are likely to watch upcoming economic data closely for further direction.
GBP/USD – Technical Analysis
GBP/USD is trading at $1.22109, up 0.10%, as the pair consolidates below a critical resistance zone.
The key pivot point at $1.22439 marks a significant level for market direction. A failure to break above this level could invite further selling pressure, aligning with the broader downtrend.
Immediate resistance lies at $1.22439, with additional hurdles at $1.23155 and $1.23335. Conversely, a decisive break below the support level of $1.21019 may trigger sharper declines, with subsequent support levels at $1.20194 and $1.19346.
The bearish bias is supported by the descending trendline and the 50-day SMA at $1.23335, which caps upside potential.
The risk-to-reward setup favors selling below $1.22439, with a target of $1.21019 and a stop loss at $1.23155.
This trade setup offers a potential profit of $1,420 per standard lot against a risk of $716, with a favorable risk-to-reward ratio of 1:1.9.
Related News
- GOLD Price Analysis – Jan 15, 2025
JOIN LHFX TODAY
24/7 live support, lightning fast withdrawals, guaranteed safe and reliable trading platforms with a true ECN broker.