British Pound Analysis: Will GBP/USD’s Imminent Golden Cross Take it Above 1.2725?

GBP/USD Key Points

GBP/USD is soaring on expectations of aggressive Fed rate cuts in 2024, despite Fed Chairman Powell’s protestations.
An imminent “golden cross of the 50-day EMA above the 200-day EMA marks a shift to a bullish longer-term trend.
The pair is testing resistance near 1.2725, with the next resistance level looming up near 1.2900.

GBP/USD Fundamental Analysis

It’s been a relatively quiet week for UK economic data, but developments on the other side of the Atlantic have more than made up for it. The big turning point was on Tuesday when Federal Reserve Governor Christopher Waller noted that the central bank could start cutting interest rates in “several months” if inflation data continued to moderate. This was the first time a core Fed official formally acknowledged the possibility of rate cuts, let alone setting out a specific, relatively rapid timeline.

In his speeches earlier today, Fed Chairman Powell attempted to walk that back, stating "It would be premature to conclude with confidence that we have achieved a sufficiently restrictive stance, or to speculate on when policy might ease. We are prepared to tighten policy further if it becomes appropriate to do so." However, markets are not buying the token attempt at hawkish talk, with Fed Funds Futures traders now pricing in a 2-in-3 chance of a rate cut in the Fed’s March meeting per CME FedWatch:

Source: CME FedWatch

Looking a bit further out, traders have tacked on a full 50bps of projected 2024 rate cuts this week alone, underscoring the big dovish shift in markets. Not surprisingly, the US Dollar has sold off aggressively this week, losing more than -1% against all of its major rivals outside of the euro.

British Pound Technical Analysis – GBP/USD Daily Chart

Source: TradingView, StoneX

Keying in on GBP/USD, cable is recovering from yesterday’s pullback to retest its 61.8% Fibonacci retracement near 1.2725. At the same time, the 50-day EMA is about to cross back above the 200-day EMA, creating a classic “golden cross,” that marks a shift in the longer-term trend from bearish to bullish.

Looking ahead, bulls will want to see a clean break above 1.2725 to opend the door for a continuation toward the August highs near 1.2800, with the 78.6% Fibonacci retracement of the July-October pullback near 1.2900 marking the next clear level of resistance after that. If we do see a bearish reversal off 1.2725 resistance, the first logical support level to watch will be this week’s low near 1.2600

-- Written by Matt Weller, Global Head of Research

Follow Matt on Twitter: @MWellerFX

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.