Daily Analysis For GBP/USD 14-06-2023

GBP/USD Analysis

Key Points

·       GBP/USD fluctuates near a five-week high following a release of mixed economic data from the UK.

·       UK GDP showed improvement in April, the disappointing performance of Manufacturing and Industrial Production failed to inspire bullish sentiment for the Cable.

·       The Pound Sterling buyers remain hopeful due to the increasing probability of a rate hike by the Bank of England (BoE) in contrast to the Federal Reserve's pause in its rate increase cycle that has been ongoing for the past 1.5 years.

·       To drive GBP/USD further, it will be crucial for Fed policymakers to dismiss any calls for additional rate hikes and revise their economic forecasts. The market is eagerly anticipating Chairman Powell's upcoming speech for potential cues.

Today's Scenario: -

GBP/USD remains relatively unchanged around the 1.2600 level, showing limited reaction to the mixed economic data from the UK released prior to the London open on Wednesday. The market's cautious sentiment ahead of the Federal Open Market Committee (FOMC) monetary policy meeting could be a contributing factor. Additionally, the lack of consistency in the data and doubts surrounding the strength of the UK economy have also kept Pound Sterling traders cautious.

In terms of the UK's economic indicators, the Gross Domestic Product (GDP) for April showed growth of 0.2%, matching the previous figure of -0.3%. However, both Industrial Production and the Index of Services for the three-month period ending in April disappointed.

Despite the mixed data from the UK, GBP/USD remains on the radar for bullish traders due to positive employment and inflation figures reported previously in Britain. Furthermore, early indications from the Bank of England (BoE) have suggested a willingness to pursue further rate hikes.

On the other hand, the US Dollar faced downward pressure due to disappointing inflation numbers in the United States, as indicated by the Consumer Price Index (CPI) and Core CPI figures for May. This supported the demand for the GBP/USD pair.

While the initial market reaction to the UK data was muted, mainly due to concerns ahead of the FOMC meeting, the GBP/USD pair appears to have lost some of its bullish bias. Therefore, a surprise positive tone from Fed Chair Jerome Powell and/or optimistic economic forecasts could potentially bring sellers back into the market.

Diagram of GBP/USD: -

Economic Events: -

Date      Event                                                                                            Impact        Currency

 02:00   (United States) API Crude Oil Stock Change                  Medium             USD

 04:15   (New Zealand) Current Account                                                  Medium NZD

 05:30   (New Zealand) Food Inflation YoY                                         Low NZD

 10:00   (Netherlands) Balance of Trade                                                          Low  EUR

 10:30   (Finland) Inflation Rate YoY                                                                 Low  EUR

 10:30   (Finland) Inflation Rate MoM                                                              Low  EUR

 10:30   (Finland) CPI                                                                                         Low     EUR

 11:30   (United Kingdom) GDP 3-Month Avg                                          Medium GBP

 11:30   (United Kingdom) Goods Trade Balance Non-EU                              High GBP

 11:30   (United Kingdom) Balance of Trade                                      Low GBP

 11:30   (United Kingdom) Construction Output YoY                       Low GBP

 11:30   (United Kingdom) Industrial Production YoY                       Low GBP

 11:30   (United Kingdom) Industrial Production MoM                            Medium             GBP

 11:30   (United Kingdom) Manufacturing Production YoY             Low GBP

 11:30   (United Kingdom) Manufacturing Production MoM    Medium            GBP

 11:30   (United Kingdom) Goods Trade Balance                                            High GBP

 11:30   (United Kingdom) GDP YoY                                                                 Low  GBP

 11:30   (United Kingdom) GDP MoM                                                             High  GBP

 11:30   (Germany) Wholesale Prices MoM                               Medium EUR

 11:30   (Germany) Wholesale Prices YoY                                  Medium EUR

 12:30   (China) FDI (YTD) YoY                                                                   Medium   CNY

 12:30   (Slovakia) Inflation Rate MoM                                                            Low  EUR

 12:30   (Slovakia) Inflation Rate YoY                                                                Low  EUR

 12:30   (Slovakia) Core Inflation Rate MoM                                      Low EUR

 12:30   (Slovakia) Core Inflation Rate YoY                                        Low EUR

 12:30   (Slovakia) CPI                                                                                      Low      EUR

 13:30   (France) IEA Oil Market Report                                                   Medium  EUR

 14:30   (Euro Area) Industrial Production MoM                                     Medium EUR

 14:30   (Euro Area) Industrial Production YoY                                              Low  EUR

 14:30   (Montenegro) GDP Growth Rate YoY                                                Low  EUR

 15:00   (Germany) 10-Year Bund Auction                               Medium  EUR

 15:30   (Portugal) Inflation Rate MoM                                                          Low    EUR

 15:30   (Portugal) Inflation Rate YoY                                                             Low    EUR

 15:30   (Portugal) CPI                                                                                     Low       EUR

 15:30   (Ireland) Residential Property Prices YoY                                          Low  EUR

 15:30   (Ireland) Residential Property Prices MoM                       Low EUR

 16:30   (United States) MBA 30-Year Mortgage Rate                Medium USD

 16:30   (United States) MBA Mortgage Applications                      Low USD

 16:30   (United States) MBA Mortgage Refinance Index                              Low USD

 16:30   (United States) MBA Mortgage Market Index                                  Low USD

 16:30   (United States) MBA Purchase Index                                                 Low  USD

 17:00   (United Kingdom) NIESR Monthly GDP Tracker                               Low GBP

 18:00   (Canada) New Motor Vehicle Sales                                     Low  CAD

 18:00   (United States) Core PPI MoM                                                  Medium    USD

 18:00   (United States) Core PPI YoY                                                             Low    USD

 18:00   (United States) PPI YoY                                                                      Low     USD

 18:00   (United States) PPI MoM                                                     High  USD

 20:00   (United States) EIA Heating Oil Stocks Change                                  Low USD

 20:00   (United States) EIA Refinery Crude Runs Change                              Low USD

 20:00   (United States) EIA Crude Oil Stocks Change               Medium USD

 20:00   (United States) EIA Distillate Stocks Change                      Low USD

 20:00   (United States) EIA Gasoline Production Change                             Low USD

 20:00   (United States) EIA Crude Oil Imports Change                                 Low USD

 20:00   (United States) EIA Gasoline Stocks Change                Medium USD

 20:00   (United States) EIA Cushing Crude Oil Stocks Change         Low              USD

 20:00   (United States) EIA Distillate Fuel Production Change         Low              USD

 21:00   (United States) 17-Week Bill Auction                                                 Low USD

 23:30   (United States) Fed Interest Rate Decision                          High              USD

 23:30   (United States) FOMC Economic Projections                        High              USD

 23:30   (United States) Interest Rate Projection - 1st Yr                           Medium            USD

 23:30   (United States) Interest Rate Projection - 2nd Yr                         Medium            USD

 23:30   (United States) Interest Rate Projection - Current        Medium            USD

 23:30   (United States) Interest Rate Projection - Longer                        Medium             USD

Buy Scenario: -

GBP/USD experienced a loss of upward momentum at a multi-day high on a significant day that included the US Federal Reserve (Fed) decision and the release of monthly UK data. Despite rising to the highest level since May 11 the previous day, the Cable pair remains uncertain, hovering near the 1.2600 level. In addition to pre-data/event anxiety, technical indicators also suggest a potential reversal in prices, enticing sellers.

On the other hand, a clear break above the recent peak near 1.2625 could invalidate the bearish bias and propel the GBP/USD price towards challenging the previous monthly high around 1.2680. Till we do not advise to buy GBP/USD.

Sell Scenario: -

The overbought conditions indicated by the Relative Strength Index (RSI) and the presence of an ascending resistance line from June 01, currently around 1.2615, pose as initial challenges for GBP/USD bulls. Furthermore, the appearance of a Doji candlestick at the multi-day high on the four-hour timeframe indicates a possible pullback in prices.

As a result, it is likely that the pair will consolidate its recent gains, with the 61.8% Fibonacci retracement level of the May downward move, approximately at 1.2535, coming into focus. It is worth noting that this technical level is commonly referred to as the golden Fibonacci ratio.

If GBP/USD drops below the aforementioned key Fibonacci support, it could potentially decline towards the 50% Fibonacci retracement level near the psychological round figure of 1.2500.

However, it is important to consider that the presence of the bullish Moving Average Convergence Divergence (MACD) indicator may provide support around the 200-period Simple Moving Average (SMA) level of 1.2485, posing a challenge for bearish traders. Till then we do not advise selling GBP/USD.

Support and Resistance Level: -

Support            Resistance  

 S1 1.2538  -   R1 1.2655

 S2 1.2465  -   R2 1.2698

 S3 1.2422  -   R3 1.2772