- GBP/USD prices attempted a cautious rebound last week, but gains were capped at 1.2540 before prices quickly retreated back to support at 1.2449 and closed the week around 1.2492.
- As I mentioned previously, factors supporting the US dollar remain strong, driven by safe-haven demand and robust US economic data, which supports the Federal Reserve's tightening path, in contrast to the Bank of England.
What is the expected outlook for GBP/USD in the coming days?
In this regard, ING Bank says: "The dollar should be higher" with GBP/USD spot sticking to support at 1.25 and the dollar is expected to be stronger after strong US economic data on Thursday, ING analysts warn, expecting a late US dollar rally.
According to forex trading platforms, GBP/USD fell sharply after US consumer spending showed continued hot inflation trends in the US economy but recovered to above 1.25 before the weekend. However, ING Bank analyst Francisco Pesoll says the dollar's weakness is not consistent with equity and fixed income markets, and he does not expect it to last long.
He added, “We expect a delay in the strengthening of the US dollar after the recent upward surprise in the US personal consumption expenditures data for the first quarter of the year.”
According to forex trading, the dollar rose after the core PCE price deflator - a measure of consumer spending - rose to 3.7% on a quarterly annualized basis, three points above expectations. Spending on services grew at an annual rate of 4.0%, the fastest increase in consumer services spending since the stimulus-driven surge in 2021.
Obviously, this is not the kind of data the Fed wants to see after a rapid cycle of rate hikes, pushing markets to bet that the first-rate cut won't come until December. The analyst added, "The dollar should be trading higher. The very short-term dollar surge against major currencies suggests that the FX market still has some tendency to give more weight to negative US data news than positive dollar news. But a delayed re-coupling with higher rates and lower stocks seems likely."
Accordingly, ING Bank tells clients that the main FX drivers all point to dollar strength: rising Treasury yields, widening dollar swap spreads, and falling stocks. The analyst also said: "This would not be the first time the dollar has bounced back from a slight lag in rates and stocks. We think this is likely to happen today or early this week."
If this assessment is correct, GBP/USD spot is on track for another decline below 1.25 before too long.
Technical forecasts for the GBP/USD pair today:
The GBP/USD price has formed lower highs and lower lows within a bearish channel on the 4-hour chart. Recently, the price is in the middle of a decline and is testing the 50% Fibonacci retracement level. Technically, the largest correction could reach the 61.8% level at 1.2557 near the top of the channel and the minor psychological mark. If any of the Fibonacci levels hold as a ceiling, the GBP/USD price may fall to the swing low near the 1.2300 support and the channel bottom.
At the same time, the 100 SMA falls below the 200 SMA to confirm that the overall trend remains bearish or that selling is likely to gain momentum rather than reverse. Furthermore, the 100 simple moving average also serves as dynamic resistance. The Stochastic indicator is in the overbought area and begins to head downward to indicate rising selling pressure. Also, the oscillator has a lot of room to move down, so the price can continue to follow the same approach until sellers run out. Eventually, the RSI appears to be making a top without reaching the overbought zone, indicating that sellers are eager to return.
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