Daily Analysis For GBP/USD 19-06-2023

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.


Support and Resistance Level: -


 Support           Resistance  

 S1 1.2777  -   R1 1.2857

 S2 1.2733  -   R2 1.2893

 S3 1.2697  -   R3 1.2937


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