**GBP/USD Weekly Outlook: Gradual Rebound amid Dollar Consolidation**
*Adapted from analysis by ActionForex.com*
**Overview**
The GBP/USD currency pair exhibited a cautious yet steady rebound during recent sessions, capitalizing on a phase of US Dollar consolidation. After an extended downward trajectory, Sterling bulls are seeking validation for a sustainable turnaround, as the pair navigated back above key psychological levels. However, prevailing global uncertainties and the proximity of major event risks mean the path higher is not without its challenges.
**Technical Picture**
The medium-term trend for GBP/USD remains clouded by the steep correction initiated in late May, which saw Cable retreat from above the 1.2800 region towards multi-month lows. A combination of Dollar strength and inconsistent UK economic data contributed to this slump. Yet, the latter half of June brought tentative signs of stabilization and a nascent recovery.
– GBP/USD had been pressing towards the 1.2500 support but so far managed to avoid a clear bearish breakdown.
– The price action shows the formation of higher lows on the daily chart, suggesting downside momentum is losing steam.
– The 20 and 55-day EMAs are flattening, signaling that selling pressure may be exhausted in the near-term.
Technical participants are now eyeing the 1.2650 and 1.2700 resistances as potential targets. A clean break above these levels could suggest a deeper move higher, but this will likely require sustained risk appetite and evidence that US Dollar softness is more than a brief consolidation.
**Support and Resistance Levels**
– Initial Support: 1.2516, corresponding with the June pivot lows.
– Major Support: 1.2445, the key swing low recorded in early June.
– Initial Resistance: 1.2670, a recent intra-day high and technical hurdle.
– Major Resistance: 1.2760, the descending trendline from early June’s peak and a threshold for broader bullish ambitions.
**Indicators and Oscillators**
– Momentum indicators like RSI and Stochastics have turned up from oversold territory, but have yet to cross firmly into bullish zones.
– MACD on the daily chart is exhibiting a series of higher troughs, possibly hinting at the beginnings of positive divergence.
– The currency pair remains below its 200-day moving average, which is a reminder that long-term risks to the downside persist until convincingly reclaimed.
**Fundamental Backdrop**
Fundamental drivers in recent trading have been dominated by diverging central bank outlooks and shifting risk sentiment. While the US Federal Reserve delivered a hawkish pause and emphasized their data-dependent stance, markets have started pricing in fewer rate cuts for 2024 than previously anticipated. This has contributed to intermittent periods of US Dollar strength, restricting the upside potential for Cable.
On the UK side:
– The latest set of economic data points to resilience, particularly in labor and inflation figures, which offsets recession fears and sustains some policy tightening bets.
– The Bank of England (BoE) provided mixed signals by holding rates steady but reiterating its watchful stance on inflation.
– Political uncertainty due to ongoing election campaigning has added some volatility, although traders generally expect continuity in monetary policy regardless of the election outcome.
The interplay between a cautious BoE and a less dovish Fed creates a complex backdrop. While Sterling has room to retrace higher, any sign of renewed economic stress or policy disappointment could quickly reverse recent gains.
**Key Events to Watch**
– US PCE Inflation Report: This is a pivotal gauge for Fed policy and any upside surprise would likely reignite Dollar demand.
– UK GDP and CPI Reports: Both will be scrutinized for signs that the UK economy can sustain current growth and price pressure, maintaining the case for the BoE to stay the course.
– Central Bank Speeches: Comments from Fed and BoE officials could reshape expectations for rate adjustments and trigger volatility.
**Market Positioning**
CFTC data suggests
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