GBP/USD Bull-Flag Breakout Fizzles to Keep RSI Below 70

Article By: ,  Strategist

US Dollar Outlook: GBP/USD

GBP/USD trades in a narrow range after breaking out of a bull-flag formation, but the exchange rate may attempt to test the February 2022 high (1.3644) as it appears to be tracking the positive slope in the 50-Day SMA (1.3042).

GBP/USD Bull-Flag Breakout Fizzles to Keep RSI Below 70

GBP/USD trades near the monthly high (1.3434) as the US Personal Consumption Expenditure (PCE) Price Index narrows to 2.2% in August from 2.5% per annum the month prior, with the update also showing the gauge for Personal Income increasing 0.2% during the same period versus forecasts for a 0.4% print.

Signs of easing inflation may encourage the Federal Reserve to carry out a rate-cutting cycle as the central bank ‘projects that the appropriate level of the federal funds rate will be 4.4 percent at the end of this year,’ and the US Dollar may face headwinds ahead of the next rate decision on November 7 as Chairman Jerome Powell and Co. move towards a neutral policy.

Join David Song for the Weekly Fundamental Market Outlook webinar. David provides a market overview and takes questions in real-time. Register Here

 

With that said, GBP/USD may continue to register fresh yearly highs over the remainder of 2024 as it reflects a bullish trend, but the exchange rate may consolidate over the coming days as the Relative Strength Index (RSI) struggles to push back into overbought territory.

GBP/USD Price Chart –Daily

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

  • The bull-flag formation in GBP/USD seems to have run its course as the exchange rate struggles to hold above 1.3410 (78.6% Fibonacci retracement), and a move below 1.3310 (100% Fibonacci extension) may keep the Relative Strength Index (RSI) below 70.
  • A break/close below 1.3210 (50% Fibonacci extension) brings the 1.3140 (78.6% Fibonacci extension) to 1.3150 (23.6% Fibonacci extension) region on the radar, with the next area of interest coming in around the monthly low (1.3002).
  • Nevertheless, GBP/USD may track the positive slope in the 50-Day SMA (1.3042) as it holds above the moving average, and a move above 70 in the RSI is likely to be accompanied by a further advance in the exchange rate like the price action from earlier this year.
  • In turn, GBP/USD may attempt to test the February 2022 high (1.3644), with the next area of interest coming in around the 2022 high (1.3749).

--- Written by David Song, Senior Strategist

Follow on Twitter at @DavidJSong

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.

© City Index 2024