**GBP/USD Weekly Outlook: Consolidation Persists, Awaiting Key Breakout**
*Credit: ActionForex.com; analysis based on the article authored by ActionForex analyst team.*
The GBP/USD pair displayed a muted performance throughout the week, remaining comfortably stuck within a familiar consolidation range. The lack of decisive momentum was evident as neither bulls nor bears could establish clear control, highlighting the prevailing uncertainty surrounding both the UK and US economic landscapes. As the week drew to a close, investors continued to await significant fundamental catalysts capable of breaking the currency pair out of its current holding pattern.
**Weekly Recap: Range-Bound Trading Dominates**
– GBP/USD fluctuated narrowly throughout the week, exemplifying ongoing range-bound behavior.
– Price action stayed predominantly above the 1.2600 support region but repeatedly failed to sustain pushes above the 1.2800 resistance barrier.
– Traders oscillated between optimism regarding the UK’s inflation prospects and caution about the timing and scope of potential Bank of England (BoE) policy shifts.
**Technical Overview: Key Levels Remain Intact**
The currency pair’s technical structure offered little novelty for traders accustomed to recent price ranges. The immediate focus remained pinned on whether GBP/USD could muster enough volatility to exit its current consolidation phase.
*Support and Resistance Levels:*
– **Near-term resistance**: 1.2802 high established in late May/early June.
– **Immediate support**: 1.2687 minor level. If breached, eyes turn to 1.2599 for next support.
– **Medium-term floor**: 1.2517, holding the broader uptrend structure intact.
– **Critical resistance**: Sustained break above 1.2802 (recent high) would signal a potentially bullish continuation, aiming for 1.2892 and 1.3141.
*Technical Indicators and Patterns:*
– The daily Relative Strength Index (RSI) hovers near the neutral mark, reinforcing the current lack of direction.
– The 20-day Exponential Moving Average (EMA) aligns closely with recent closing prices, underlining market indecisiveness.
– Lateral movement between 1.2600 and 1.2800 continues to draw in short-term range traders.
– Longer-term uptrend remains technically valid as long as major support at 1.2517 holds.
**Fundamental Drivers: Diverging Central Bank Outlooks**
Fundamental dynamics underpinning GBP/USD have grown increasingly nuanced. Divergent policy signals between the BoE and the US Federal Reserve remain a driving force, with both central banks attempting to assess the correct monetary path amid shifting economic data.
*Bank of England Factors:*
– BoE policymakers remain cautious about inflation, mindful of recent stickiness in services inflation and wage growth metrics.
– The market has slightly pared back expectations for aggressive BoE rate cuts, influenced by resilient UK labor market data and persistent inflation readings.
– BoE Governor Andrew Bailey and fellow policymakers suggest rate cuts are likely later in the year, but market-implied probabilities favor a gradual and limited easing cycle.
– UK growth data continues to oscillate between mild expansion and stagnation, adding to the BoE’s reluctance for swift action. Recent PMI surveys show the services sector leading a tentative recovery, offset by manufacturing softness.
*Federal Reserve Factors:*
– Recent US economic releases have continued to present a mixed view. Robust jobs growth and sticky core inflation suggest the Fed will maintain its higher-for-longer narrative, dampening market hopes for near-term policy easing.
– The Federal Open Market Committee (FOMC) maintained its policy rate but slightly shifted its “dot plot” projections to indicate just one cut in 2024, down from three previously signaled.
– Market participants now expect the first Fed rate cut in late 2024, further supporting the US dollar on dips.
– US economic resilience is leading to a tightening of financial conditions, which may eventually curtail dollar gains, yet
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