Published on Jun 19, 2023

Daily Analysis For GBP/USD 19-06-2023

GBP/USD Analysis

Key Points: -

· GBP/USD is enjoying a consistent upward movement for the fourth consecutive day and is currently trading near a 14-month high.

· The British Pound (GBP) is being supported by increasing expectations of additional interest rate hikes by the Bank of England (BoE), which acts as a positive driver for the currency.

· At the same time, uncertainty surrounding potential rate hikes by the US Federal Reserve (Fed) is keeping US Dollar (USD) bulls cautious and providing further support to GBP/USD.

Today's Scenario: -

The GBP/USD pair has continued to gain positive momentum for the fourth consecutive day, trading just below the mid-1.2800s. It is currently at its highest level since April 2022, observed during the Asian session.

The British Pound (GBP) is showing relative strength as market participants anticipate the Bank of England (BoE) to maintain its policy tightening stance to prevent inflation expectations from becoming entrenched. It is widely expected that the BoE will raise the benchmark interest rates by 25 basis points on Thursday, reaching 4.75%, which would be the highest level since April 2008. Furthermore, there are speculations in the market of a potential larger rate increase of 50 basis points. These factors, combined with subdued price action in the US Dollar, are acting as tailwinds for the GBP/USD pair.

Meanwhile, the uncertainty surrounding the Federal Reserve's (Fed) rate hike trajectory is preventing the US Dollar from capitalizing on its rebound from a one-month low, thus providing additional support to the GBP/USD pair. The Fed signaled last week that there may still be a need for borrowing costs to rise by up to 50 basis points by the end of the year. However, weaker-than-expected US macroeconomic data has raised concerns about the extent to which the Fed can continue raising rates, leading to speculation that the tightening cycle may be approaching its end.

Therefore, market focus will be on Fed Chair Jerome Powell's two-day congressional testimony on Wednesday and Thursday, as well as the release of the latest consumer inflation figures on Wednesday. The highly anticipated BoE monetary policy decision on Thursday and the flash PMI data from the UK and the US will also provide significant impetus to the GBP/USD pair. Given these upcoming data and events, bullish traders may exercise caution in placing new bets.

Furthermore, trading volumes are relatively lighter due to a bank holiday in the US, which calls for caution before positioning for further upside in the GBP/USD pair. Nevertheless, the aforementioned fundamental factors suggest that the path of least resistance for the pair remains to the upside, and any substantial corrective pullbacks may still be viewed as buying opportunities.

Diagram of GBP/USD: -

Economic Events: -

Date Event Impact Currency

04:00 (New Zealand) Services NZ PSI Low NZD

04:00 (New Zealand) Composite NZ PCI Low NZD

05:30 (United States) Juneteenth None USD

09:05 (Japan) 52-Week Bill Auction Low JPY

13:30 (Australia) Myfxbook AUDUSD Sentiment Medium AUD

13:30 (Switzerland) Myfxbook USDCHF Sentiment Medium CHF

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

13:30 (Euro Area) ECB Survey of Monetary Analysts Low EUR

15:00 (Germany) 12-Month Bubill Auction Low EUR

16:00 (Portugal) Current Account Low EUR

16:30 (Euro Area) ECB Lane Speech Low EUR

17:10 (Euro Area) ECB Schnabel Speech Low EUR

18:00 (Canada) PPI YoY Low CAD

18:00 (Canada) PPI MoM Low CAD

18:00 (Canada) Raw Materials Prices YoY Low CAD

18:00 (Canada) Raw Materials Prices MoM Low CAD

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

19:30 (United States) NAHB Housing Market Index Medium USD

23:30 (Euro Area) ECB Guindos Speech High EUR

Buy Scenario: -

In order for the GBP/USD pair to maintain its upward momentum, it needs to stay above the pivot level at $1.2813 and aim for the First Major Resistance Level (R1) at $1.2857. A breakthrough above last week's high of $1.2837 would indicate a bullish outlook for the week. However, this would require support from the UK Consumer Price Index (CPI) report and the Bank of England (BoE), along with positive private sector PMI data and retail sales figures on Friday.

If the breakout occurs, the Pound would likely face resistance at the Second Major Resistance Level (R2) at $1.2893. The Third Major Resistance Level (R3) is positioned at $1.2937. Till we do not advise to buy GBP/USD.

Sell Scenario: -

On the other hand, if the pair falls below the pivot level, it could target the First Major Support Level (S1) at $1.2777. However, unless there is a sell-off triggered by a central bank announcement, it is expected that the GBP/USD pair would avoid dropping below $1.25 and the Second Major Support Level (S2) at $1.2733.

The Third Major Support Level (S3) is situated at $1.2697. Till then we do not advise selling GBP/USD.