GBP/USD Analysis: Overbought Levels

According to recent trading, the GBP/USD exchange rate is still in a constructive technical setting that could witness an extension of gains over the coming days, which is characterized by the fall statement in Britain tomorrow, Wednesday, and the PMI survey for the manufacturing and services sectors for November on Thursday. According to Forex currency market trading, the GBP/USD price reached its highest level since mid-September last week at 1.2506 thanks to US inflation data that came in below consensus and unemployment claims. At the beginning of this week's trading, it jumped towards the resistance level of 1.2517 and is holding on to the 1.25 peak so far.

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The pound's advance was undermined by British inflation data, which came in weaker than the market had expected, as did UK retail sales for October. But some analysts say the outlook for GBP/USD remains constructive in the near term. Clearly, the broader technical settings continue to suggest that directional risks are tilted to the upside.

Sterling Forecast Today:

However, some analysts believe that GBP/USD is actively consolidating within a bullish flag pattern and that strong support on GBP lows at 1.2375 this week keeps the upside trend intact. Nearby, gains across 1.2420/25 – near current spot levels – should be supportive for the pound. Therefore, rising above this target at 1.2455 may call for a subsequent move to the resistance 1.2525.

For his part, Emery Spizer, an expert at Westpac Bank, says that there is a possibility that the pound sterling / dollar will reach 1.2600 in the coming weeks. Especially, if the disappointing US data continues recently. Recently, the analyst acknowledged that US drivers, such as weak Labor and inflation data, were the main determinants of the GBP/USD trend over the past month, helping to halt the sharp decline in yield spreads between Britain and the US.

But this week only sees second-tier data from the US, which may limit the volatility of the pound against the dollar. In this regard, Kate Jux, Forex market analyst at Société Générale, says: “If you ignore the purchasing managers’ indicators on Friday (which is what the Americans will do). “Existing home sales, the Philadelphia Fed, durable goods orders, and the University of Michigan survey data are all second-rate data.”

Urgently, We may have to wait until the first half of December for the US dollar side of the equation to shine; The analyst adds that we will see a lot of data points that will disturb Christmas lunch: ISM on the 1st, the Non-Farm Payrolls report on the 8th, the CPI on the 12th, and the FOMC on the 13th. Finally, retail sales on the 14th.

By tomorrow Wednesday, the UK is providing further interest with its autumn statement, which would see the government set out updated tax and spending plans. Therefore, such budget announcements could have a major impact on the value of sterling, which fell to near-record lows just over a year ago when Liz Truss's government presented its ill-fated mini-budget.

Accordingly, both the pound and the Truss fell as markets worried about Britain's ability to pay for the huge tax cuts and spending increases proposed by the new government. Furthermore, the era of Ministers Sunak and Hunt is one that puts sustainable finance at its heart, and for this reason, we see very low chances of a significant fall in the price of sterling after the Autumn 2023 statement. Clearly, the British government will be highly constrained by the UK’s fiscal position, limiting the scope of tax cuts and increase spending. Also, there are signs that the focus will be on helping boost businesses ahead of the consumer-focused budget statement in spring 2024. Finally, If the government convinces markets that it has done enough to boost UK productivity, sterling could benefit.

GBPUSD Expectations today:

The GBP/USD forecast currently shows a bullish shift and stability above the 1.2500 resistance supports the strength of bulls' control. If the currency pair moves towards the resistance levels of 1.2560, 1.2630, and 1.2700, the general trend will change to bullish, as is the performance on the daily chart below, and at the same time, the technical indicators will move towards strong saturation levels for purchase. Also, by considering that the return of the GBP/USD price towards the support level of 1.2330 evaporates the current bullish rebound attempts. Today, the currency pair will react to the reaction from listening to the Bank of England policy report, and later the content of the minutes of the last meeting of the US Federal Reserve will be announced.

GBP/USD (Daily Chart)

Mahmoud Abdallah
Mahmoud has been working fulltime in the Foreign Exchange markets for 12 years. Offers his analysis, articles and recommendations at the most renewed Arabic websites specialized in the global financial markets, and his experience gained a lot of interest among Arab traders. Works on providing technical analysis, market news, free signals and more with follow up for at least 12 hours a day, and aims to simplify forex trading and the concept of trading for his audience.