- During recent Forex trading, the GBP/USD exchange rate recovered last week but was unable to maintain the 1.25 level.
- A hawkish US Federal Reserve update and strong US jobs numbers may bring back more of these gains.
- At the time of writing the analysis, the price of sterling against the dollar GBP/USD was stable around the level of 1.2565.
According to the platforms of Forex currency trading companies, despite falling 0.80% against the pound, the dollar ended the week on a stronger footing thanks to the strong PCE reading and follow-through buying after Thursday's impressive consumer spending data. However, signs of fatigue are creeping into the dollar's 2024 rally, with markets demanding hotter numbers to keep the train moving forward. This makes us confident that we will not see new lows below the 1.23 support in the next five days.
Meanwhile, the risk for dollar bulls this week is that US economic data disappoints, and that some of the overbought dollar positioning has been flushed out of the market, leading to a deeper dollar pullback. Moreover, this would allow GBP/USD to capitalize on last week's rebound in the coming days and we look forward to any rise to reach 1.2566, a 38.4% Fibonacci retracement of the October-March rally.
Initially, gains may stall here due to historical support and resistance levels in the vicinity. However, we note that all momentum indicators are negative and continue to point to further GBP/USD weakness. For example, the exchange rate is trading below its 50, 100 and 200-day moving averages. We will not turn bullish on different timeframes until we see these levels broken and held.
Technical forecasts for the GBP/USD pair today:
From a technical perspective, we would look to view any further uptrend in GBP as a retracement in a broader downtrend. Eventually, the strength will be sold off and we suggest those looking to sell the British pound to be smart as we do not see an uptrend forming at this point. However, there are some important dates on the US calendar that could really set the tone for early May in this week's trading and provide tactical opportunities for those monitoring this market.
With market expectations for the Fed's first US interest rate cut until December after last week's hot consumer spending numbers, this week's numbers will determine whether an interest rate cut in 2024 is possible or whether we will have to wait until 2025.
According to the results of the economic calendar data, the US Federal Reserve’s policy update on Wednesday will be the first major test for the dollar, as investors will be interested in knowing whether the Federal Reserve is ready to validate market expectations regarding the first interest rate hike in December. Remember, the US Federal Reserve's latest forecasts showed that policymakers expect three US interest rate cuts in 2023. Moreover, the Fed will have to admit that this is a little ambitious in the face of incoming data showing that the economy is starting to generate heat again.
Consequently, the US dollar will strengthen if the Federal Reserve warns that its previous forecasts appear generous. This week's big data event will be the US jobs report on Friday: weakness here will indicate that the turning point is finally coming. Thus, we expect a significant stock market rally and a decline in the dollar price if the Non-Farm Payrolls reading is below the 210K that the market is expecting. Furthermore, this economy always seems to surprise us to the upside, so we won't hold our breath. Ultimately, any further win would send the GBP/USD rate below the 1.25 level again.
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