GBP/USD Bounces Back Ahead of November 2023 Low

US Dollar Outlook: GBP/USD

GBP/USD carves a series of higher highs and lows following the failed attempt to test the November 2023 low (1.2096), but the exchange rate may continue to track the negative slope in the 50-Day SMA (1.2610) as it still holds below the moving average.

GBP/USD Bounces Back Ahead of November 2023 Low

GBP/USD extends the advance from the monthly low (1.2100) as the update to the US Consumer Price Index (CPI) reveals an unexpected downtick in the core rate of inflation, with the recent recovery in the exchange rate pulling the Relative Strength Index (RSI) out of oversold territory.

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In turn, the RSI may show the bearish momentum abating as it climbs back above 30, but data prints coming out of the US may continue to sway GBP/USD as the Retail Sales report is anticipated to show another rise in household spending.

US Economic Calendar

US Retail Sales is projected to increase 0.6% in December after expanding 0.7% the month prior, and a positive development may generate a bullish reaction in the Greenback as it puts pressure on the Federal Reserve to pause its rate-cutting cycle.

With that said, GBP/USD may struggle to retain the advance from the monthly low (1.2100) should it snap the bullish price series, but weaker-than-expected US Retail Sales report may fuel the recent recovery in the exchange rate as it boosts speculation for Fed rate-cuts in 2025.

GBP/USD Price Chart –Daily

Chart Prepared by David Song, Senior Strategist; GBP/USD on TradingView

• GBP/USD seems to be defending the November 2023 low (1.2096) as it carves a series of higher highs and lows, with a close above the 1.2300 (50% Fibonacci retracement) to 1.2310 (61.8% Fibonacci extension) region raising the scope for a move towards the 1.2390 (38.2% Fibonacci extension) to 1.2446 (May low) zone.
• Next area of interest comes in around the month high (1.2576), but GBP/USD may continue to hold below the 50-Day SMA (1.2610) should it struggle to extend the bullish price series.
• Failure to close above the 1.2300 (50% Fibonacci retracement) to 1.2310 (61.8% Fibonacci extension) region may push GBP/USD back towards the November 2023 low (1.2096), with a breach below the 2023 low (1.2037) opening up the 1.1780 (50% Fibonacci extension) to 1.1840 (38.2% Fibonacci retracement) zone.

Additional Market Outlooks

Gold Price Recovery Stalls Ahead of December High

EUR/USD Vulnerable Amid Push Below January Opening Range

Australian Dollar Forecast: AUD/USD Halts Four-Day Selloff

USD/JPY Pulls Back to Keep RSI Below Overbought Zone

--- Written by David Song, Senior Strategist

Follow on Twitter at @DavidJSong