British Pound Outlook: GBP/USD
GBP/USD halts the selloff from earlier this week to defend the rebound from the May low (1.3140), with the recovery in the exchange rate keeping the Relative Strength Index (RSI) above oversold territory.
British Pound Forecast: GBP/USD Defends Rebound from May Low
GBP/USD bounces back from a fresh weekly low (1.3142) as the US Non-Farm Payrolls (NFP) report shows a 73K expansion in July versus forecasts for a 110K print, and signs of slowing job growth may put pressure on the Federal Reserve to further unwind its restrictive policy especially as President Donald Trump argues that the central bank ‘must substantially lower interest rates, now’ on Truth Social.
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In turn, speculation for a looming change in Fed policy may produce headwinds for the US Dollar as Governors Michelle Bowman and Christopher Waller preferred a 25bp rate-cut at the July meeting, and indications of a weakening economy may keep the Federal Open Market Committee (FOMC) on track to implement lower interest rates as the Summary of Economic Projections (SEP) still show that ‘the appropriate level of the federal funds rate will be 3.9 percent at the end of this year.’
With that said, GBP/USD may stage a larger recovery as it holds above the May low (1.3140), but a head-and-shoulders formation seems to have taken shape as the exchange rate failed to defend the June low (1.3371) after closing below the 50-Day SMA (1.3404) for the first time since April.
GBP/USD Price Chart – Daily
Chart Prepared by David Song, Senior Strategist; GBP/USD on TradingView
- GBP/USD no longer carves a series of lower highs and lows as it bounces back ahead of the May low (1.3140), with a move/close above 1.3310 (100% Fibonacci extension) bringing the 1.3410 (78.6% Fibonacci retracement) to 1.3460 (23.6% Fibonacci extension) zone on the radar.
- Next area of interest comes in around 1.3650 (38.2% Fibonacci extension), but failure to hold above the 1.3140 (78.6% Fibonacci extension) to 1.3150 (23.6% Fibonacci extension) region may push GBP/USD toward 1.3010 (61.8% Fibonacci extension).
- A move/close below the 1.2900 (23.6% Fibonacci retracement) to 1.2910 (50% Fibonacci extension) region opens up 1.2820 (38.2% Fibonacci extension), with the next area of interest coming in around 1.2710 (23.6% Fibonacci extension) to 1.2760 (61.8% Fibonacci retracement).
Additional Market Outlooks
US Dollar Forecast: EUR/USD Bounces Back Ahead of June Low
USD/CHF Trades Above 50 Day SMA for First Time Since February
USD/JPY Fails to Test July High Ahead of Fed Rate Decision
British Pound Forecast: GBP/USD Falls to Fresh Monthly Low
--- Written by David Song, Senior Strategist
Follow on Twitter at @DavidJSong
