GBP/USD Analysis

Key Points: -

·       The GBP/USD pair is consolidating its recent advances, reaching a multi-week high and fluctuating within a specific range on Monday.

·       The GBP remains supported by expectations of additional rate hikes from the Bank of England (BoE), which in turn provides stability to the pair.

·       Traders are currently displaying hesitation in placing aggressive wagers ahead of significant data and event risks scheduled for this week.

Today's Scenario: -

The GBP/USD pair begins the new week with a subdued start, consolidating its recent gains that reached a one-month high on Friday. Spot prices are trading around the 1.2575-1.2580 range, remaining relatively unchanged during the Asian session as traders await significant macro data and a key central bank event before making new directional decisions.

Meanwhile, the anticipation of additional interest rate hikes by the Bank of England (BoE) acts as a favorable factor for the British Pound and continues to support the GBP/USD pair. Market sentiment suggests that the BoE will take a more aggressive approach in tightening policies to address persistent inflationary pressures, with another 25 bps increase expected on June 22. On the other hand, the US Dollar remains slightly above the monthly low reached last Thursday amid uncertainties regarding the Federal Reserve's rate hike trajectory.

Recent dovish remarks from several Fed officials have reinforced market expectations of the central bank pausing its year-long cycle of rate hikes in June. Nevertheless, there are still expectations of a 25 bps increase in July. These expectations were bolstered by surprise rate hikes from the Reserve Bank of Australia (RBA) and the Bank of Canada (BoC) last week, indicating that the fight against inflation is ongoing and supporting the possibility of further tightening measures by the US central bank.

Therefore, the market's attention will be firmly fixed on the outcome of the highly-anticipated two-day FOMC monetary policy meeting on Wednesday. Investors will also closely monitor the release of important UK monthly employment data and the latest US consumer inflation figures on Tuesday. Additionally, concerns about a global economic slowdown may limit market optimism, reinforcing the safe-haven status of the Greenback and restraining bullish activity around the GBP/USD pair.

Diagram of GBP/USD: -

Economic Events: -

Date      Event                                                                                        Impact             Currency

4:15      (New Zealand) Electronic Retail Card Spending YoY    Low     NZD

4:15      (New Zealand) Electronic Retail Card Spending MoM  Low     NZD

5:20      (Japan) PPI YoY                                                                            Low             JPY

5:20      (Japan) PPI MoM                                                            Low           JPY

5:31      (Ireland) Construction PMI                                             Low          EUR

10:30    (Finland) Current Account                                             Low          EUR

11:30    (Japan) Machine Tool Orders YoY                                Low         JPY

12:30    (Slovakia) Construction Output YoY                              Low         EUR

13:30    (China) Total Social Financing                                                    Low           CNY

13:30    (China) New Yuan Loans                                                          Low CNY

13:30    (China) M2 Money Supply YoY                                                   Low           CNY

13:30    (China) Outstanding Loan Growth YoY                                      Low          CNY

13:30    (Switzerland) Myfxbook USDCHF Sentiment      Medium         CHF

13:30    (Australia) Myfxbook AUDUSD Sentiment         Medium         AUD

13:30    (Japan) Myfxbook USDJPY Sentiment                               Medium          JPY

13:30    (European Union) Myfxbook EURUSD Sentiment            Medium         EUR

13:30    (United Kingdom) Myfxbook GBPUSD Sentiment            Medium         GBP

13:30    (Canada) Myfxbook USDCAD Sentiment                          Medium           CAD

13:30    (New Zealand) Myfxbook NZDUSD Sentiment                 Medium         NZD

15:15    (European Union) EU Bond Auction                             Low          EUR

15:15    (European Union) 15-Year Bond Auction                                  Low          EUR

18:30    (Ecuador) Balance of Trade                                                       Low            USD

18:30    (France) 3-Month BTF Auction                                                 Low            EUR

18:30    (France) 12-Month BTF Auction                                               Low            EUR

18:30    (France) 6-Month BTF Auction                                                 Low            EUR

20:30    (Kosovo) Inflation Rate YoY                                                       Low            EUR

20:30    (United States) Consumer Inflation Expectations                    Low         USD

21:00    (United States) 6-Month Bill Auction                                        Low          USD

21:00    (United States) 3-Year Note Auction                                         Low          USD

22:30    (United States) 3-Month Bill Auction                                        Low          USD

22:30    (United States) 10-Year Note Auction                                       Low          USD

23:30    (United States) Monthly Budget Statement       Medium        USD

Buy Scenario: -

In GBP/USD a successful breakout above the aforementioned horizontal resistance area around 1.2580-85 would require confirmation by surpassing the psychological level of 1.2600 to convince GBP/USD bulls.

If that occurs, it is likely to see a rise towards surpassing the previous monthly high of 1.2680 without significant hesitation. Till we do not advise to buy GBP/USD.

Sell Scenario: -

The GBP/USD pair remains near the intraday low, experiencing its first daily decline in four days during early Monday in Europe. Currently, it is slightly bearish around 1.2570. Despite the pair's rise in the past two consecutive weeks due to a weakened US Dollar, concerns over the UK's economic well-being and market positioning for upcoming key data and events have weighed on the Pound Sterling.

From a technical standpoint, the Cable pair is facing a horizontal range that has been in place since late April, around 1.2580-85, along with an overbought RSI (14) indicator, indicating a preference for further weakness. Additionally, the MACD indicator is signaling a potential bearish crossover, adding to the downside bias.

As a result, it is likely that the GBP/USD quote will continue its recent decline towards a horizontal support zone that has been in play for about a month, around 1.2540-35. If the bearish momentum persists, the 200-SMA level near 1.2480 could pose a challenge for GBP/USD bears.

In the event that the Pound Sterling pair remains weak below 1.2535, there is a possibility of a further slump towards the previous monthly low of approximately 1.2310. Till then we do not advise selling GBP/USD.

Support and Resistance Level: -



Support and Resistance Level: -

 Support                Resistance  

 S1 1.2546    -   R1 1.2602

 S2 1.2512   -    R2 1.2624

 S3 1.2490   -    R3 1.2658