GBP/USD Selloff Pushes RSI Up Against Oversold Zone

British Pound Outlook: GBP/USD

GBP/USD falls to a fresh monthly low (1.2576) as it gives back the advance from the start of the week, with the recent selloff in the exchange rate pushing the Relative Strength Index (RSI) up against oversold territory.

GBP/USD Selloff Pushes RSI Up Against Oversold Zone

GBP/USD extends the drop from the weekly high (1.2715) even though the UK Consumer Price Index (CPI) showed a rise in both the headline and core reading for inflation, and a move below 30 in the RSI is likely to be accompanied by a further decline in the exchange rate like the price action from earlier this year.

Join David Song for the Weekly Fundamental Market Outlook webinar.

In turn, GBP/USD may continue to give back the advance from the advance from the May low (1.2446) as it starts to carve a series of lower highs and lows, and the UK Retail Sales report may keep the exchange rate under pressure as the update is anticipated to show a decline in household consumption.

UK Economic Calendar

UK Retail Sales are expected to contract 0.3% in October after expanding 0.3% the month prior, and indications of a slowing economy may push the Bank of England (BoE) to further unwind its restrictive policy as Governor Andrew Bailey acknowledges that ‘inflation has come down faster than we expected a year ago.’

With that said, the bearish price series in GBP/USD may lead to a further decline over the remainder of the week, but the RSI may show the bearish momentum abating should the oscillator hold above 30.

GBP/USD Price Chart –Daily

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

GBP/USD falls to a fresh monthly low (1.2576) after struggling to trade back above the 1.2710 (23.6% Fibonacci extension) to 1.2760 (61.8% Fibonacci retracement) region, with a breach below 1.2540 (78.6% Fibonacci retracement) opening up the May low (1.2446).
Next area of interest comes in around 1.2390 (38.2% Fibonacci extension) but lack of momentum to push the Relative Strength Index (RSI) below 30 may indicate a potential exhaustion.
Need a close above the 1.2710 (23.6% Fibonacci extension) to 1.2760 (61.8% Fibonacci retracement) region to bring 1.2820 (38.2% Fibonacci extension) on the radar, with the next area of interest coming in around 1.2900 (23.6% Fibonacci retracement) to 1.2910 (50% Fibonacci extension).

Additional Market Outlooks

USD/JPY Weakness Curbs Threat of Currency Intervention

US Dollar Forecast: AUD/USD Recovery Keeps Yearly Range Intact

USD/CAD Rally Unravels to Pull RSI Back from Overbought Zone

Gold Price Recovery Keeps RSI Above Oversold Zone

--- Written by David Song, Senior Strategist

Follow on Twitter at @DavidJSong

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.