CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
✖

British Pound Forecast: GBP/USD Finally Breaks Down – Where Next?

Article By: ,  Head of Market Research
February 5, 2024 7:15 PM

GBP/USD Key Points

  • With a series of strong economic reports reinvigorating the “US Economic Exceptionalism” theme from Q3, it’s not surprising that the US dollar is the strongest major currency on the day.
  • GBP/USD is finally breaking out of its 7-week, 200-pip range between 1.2600 and 1.2800.
  • A break through 1.2525 support could open the door for a continuation down toward the “measured move” target of the consolidation range closer to 1.2400

GBP/USD Fundamental Analysis

Confounding expectations for an imminent slowdown, the US economy appears to have accelerated in the first month of the year, if the early economic data is correct.

After a jaw-droppingly strong reading in Non-Farm Payrolls on Friday, this morning’s ISM Services PMI report also beat expectations, with the headline reading coming in at 53.4 vs. 52.0 expected. For the uninitiated, the ISM survey provides one of the broadest, most timely measures of “on the ground” economic activity in a country:

Source: ISM

With a series of strong economic reports reinvigorating the “US Economic Exceptionalism” theme from Q3, it’s not surprising that the US dollar is the strongest major currency on the day.

Looking across the rest of the week, there’s little in the way of major US data releases on tap, though multiple Fed speakers will take the stage across Tuesday, Wednesday, and Thursday, likely to reiterate that a March interest rate cut is a long shot, especially in light of the recent NFP and ISM readings.

Like the US, the UK economic calendar is relatively quiet, with tomorrow’s Construction PMI report providing potentially the biggest data-driven impetus for volatility this week.

British Pound Technical Analysis – GBP/USD Daily Chart

Source: TradingView, StoneX

Keying in on GBP/USD, cable is finally breaking out of its 7-week, 200-pip range between 1.2600 and 1.2800. The selloff kicked off after Friday’s strong NFP data, and it has carried over into this week’s trade on the back of the strong US data and hawkish “Fedspeak” over the weekend.

As of writing, the pair is testing support at the confluence of its 200-day EMA and the 38.2% Fibonacci retracement of its Q4 rally near 1.2525. If that level gives way, it would open the door for a continuation down toward the “measured move” target of the consolidation range closer to 1.2400; note that the 50% Fibonacci retracement of the Q4 rally comes in near 1.2430 as well.

-- Written by Matt Weller, Global Head of Research

Follow Matt on Twitter: @MWellerFX

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024