The British Pound showed strong signs of life against the US Dollar on Thursday, crushing the GBP/USD currency pair lower trading solidly above 1.3550. This strength comes even as economic signals are all over the map. This has especially humbled the Greenback’s performance with the doom and gloom US economic data released in May. As the eventful week continues, market participants have their eyes glued to important indicators. Forthcoming US Non-Farm Payroll (NFP) data and continued trade negotiations between the United States and China have the potential to greatly impact the future course of the GBP/USD currency pair.
The GBP/USD currency pair has formed an important support at 1.3434, the high created on September 26. GBP/USD outlook bullish. The positive angle of the 20-day Exponential Moving Average (EMA), now just above 1.3443, gives credence to this bullish sentiment. The US Dollar is struggling to bounce back following a major sell-off at the start of this week. At the same time, GBP/USD showed remarkable intrinsic strength, remaining above 1.3550 throughout European trading hours.
Current Market Dynamics
As an example, on Thursday, GBP/USD was up 0.33% on the day, a strong indicator of positive mood among traders. The pair’s support remains firm under 1.3550, suggesting sustained bullish strength. Falling short of this notion, the 14-day Relative Strength Index (RSI) upholds above the median line at 60.00. In reference to the bullish trend, market analysts indicate that this run will continue, depending on upcoming macroeconomic data and geopolitical events.
‘Too Late’ Powell needs to BEAR THE BAD NEWS & LOWER THE RATE NOW. He is unbelievable! Europe has lowered NINE TIMES. Read former President Donald Trump’s tweets on monetary policy, which could affect currency pairs such as GBP/USD. Even as traders digest these dovish sentiments, they are still concentrating on how these factors could lead to changes in monetary policy decisions going forward.
Looking ahead, in the second half of this week all eyes will be on the US NFP data due out Friday morning. This report has long been an important bellwether of economic health. It will certainly be one of the most important drivers of GBP/USD short-term performance.
Trade Talks and Economic Indicators
The NFP data is hardly the only thing that matters driving the market. Expectations around the Bank of England’s (BoE) monetary policy will be just as important in setting the tone in markets. Andrew Bailey, Governor of the BoE, recently mentioned, “I think the path remains downwards, but how far and how quickly is now shrouded in a lot more uncertainty.” Together, these comments add to the narrative that economic stakeholders are sailing in uncharted waters.
Additionally, perhaps more importantly, trade talks between the US and China are a key issue for UK businesses. China is continuing to gain a competitive advantage in global markets. On the flip side, if we are unable to get a trade deal, higher price competition may lead to a more bearish GBP/USD. Market experts express cautious optimism regarding potential negotiations, as evidenced by Trump’s recent comments on his communication with President Xi of China: “I like President Xi of China, always have, and always will, but he is VERY TOUGH, AND EXTREMELY HARD TO MAKE A DEAL WITH!”
These types of actions can impact market forces greatly, especially if they lead to a more positive trade balance. Investors are understandably following the debate with great interest. They’re aware that any of their proposed positive outcomes would likely increase the Pound Sterling’s value against the US Dollar.
Technical Analysis
GBP/USD’s technical bias is still positive as the cross moves up and down across the level 1.3550. Technically speaking, the 20-day EMA has emerged as a critical line of support, offering protection from further downward attempts. Traders are keenly eyeing January 13 2022 high at 1.3750. This $100 level is a key ceiling of resistance and likely would pose a significant threat to any further upside momentum.
The volatile state of the trading environment suggests that careening optimism and pessimism co-exist, carried by economic signs and geopolitical storms. GBP/USD economic analysis GBP/USD is currently trading in between key support and resistance levels. Market participants certainly seem prepared for this volatility as they look for big moves through upcoming data releases and external events.