GBP/USD Daily Forecast – Sterling Struggles to Hold Above 1.3000 as Rate Cut Talks Continue

GBP/USD attempted a recovery a Tuesday but has fallen under pressure once again after BoE’s Saunders discussed easing policy.
Jignesh Davda

Several members of Bank of England’s Monetary Policy Committee have discussed the need for easier monetary policy which has been weighing on Sterling.

MPC member Saunders in a speech today said that he felt a rate cut was necessary to provide support to the economy, labor market, and reduce the chance of undershooting the inflation target.

Saunders was one of the two members that surprisingly voted to cut rates in November. Since then, several more members have jumped on board the view, including Bank of England Governor Carney.

The policy stance is creating a divergence for GBP/USD after the Federal Reserve communicated intentions to remain on hold at their latest meeting, after having cut three times in 2019.

Technical Analysis

The turn higher in GBP/USD on Tuesday came from a significant area. While the 1.3000 price point is important for the exchange rate, it was a range between roughly 1.2960 and 1.2990 that held the pair lower on several attempts in the fourth quarter. The prior resistance range is now seen as support.

GBPUSD Hourly Chart

While trading in this area, there might be some uncertainty among technical traders on a directional near-term bias, despite the notable post-election downside pressure. However, a sustained downside break could see an acceleration in GBP/USD selling.

A declining trend channel is in play with the upper bound of it triggering a turn lower earlier today. A break higher from the trend channel would signal a reversal and that the support area is holding.

The US Dollar index (DXY) has fallen into a range since Friday’s NFP report, also creating some uncertainty as to the dollar’s near-term direction. DXY had been rallying with momentum after breaking higher from a two-week range last week.

On a daily chart, DXY has printed candles of indecision and this could be an area where the index tries to pullback. However, traders looking to fade dollar strength will likely look to other pairs besides GBP/USD considering the discussing of monetary policy easing in the UK.

Bottom Line

  • GBP/USD is seeing renewed downside pressure after more talks of cutting rates
  • An Important support zone is in play for the pair between 1.2960 and 1.2990.
Don't miss a thing!
Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.