British Pound Weekly Forecast
GBP/USD Forecast: Bearish
- The Pound has seen some mixed UK data but remains relatively high.
- The Fed is still expected to move on interest rates before the Bank of England.
- The coming week is short of data, so listen out for central bank speakers.
Sterling struggled with very mixed home-country economic readings in the past week and, with very few more to come in the next few days, is likely to be stuck between mulling them over and seeing how the United States Dollar does.
News that the United Kingdom slipped into technical recession in the final three months of 2023 saw both the Pound and London blue-chip stocks tick counterintuitively higher. Investors wondered how long interest rates could stay at sixteen-year highs against such a backdrop.
Meanwhile, a strong January bounce back for domestic retail sales had barely any effect on Sterling at all. That might be because the preceding month had been so woeful, or because investors want to wait and see if 2024’s strong start was a blip or the beginning of a trend. If the latter, it might just mean that any recession will be short-lived, as some economists have already felt bold enough to suggest.
The coming week has very little to offer UK economy watchers, with only the Gfk snapshot of consumer confidence on tap. It might assume more significance than usual, however, as markets will latch on to any clues about the likely resilience of sales.
On the Dollar side, markets will get a look at the Federal Open Market Committee’s latest set of policy meeting minutes. However, these may well have been overtaken by events and aren’t likely to alter the market view that Stateside rate cuts are coming toward mid-year.
On balance, this seems likely to be a week in which the US Dollar sets the pace for GBP/USD. As that pair seems to be trending lower, albeit from quite elevated levels, it’s a bearish call this week.
GBP/USD Technical Analysis
GBP/USD Daily Chart Created Using TradingView
A longer-term view of the daily chart is quite interesting at this point. A broad sideways trading range established since late November between 1.28137 and Fibonacci support at 1.24908 is now closing in on an uptrend established from the lows of September 2022.
That still offers support some way below the market at 1.24397 but the trendline will come into focus for this market next week.
It looks as though that range base at 1.24908 is a real line for Sterling bulls, and they’ve been able to defend it this year so far. Keep an eye on it this week though, as it’s coming under more pressure after the market gapped lower earlier this month. It’s notable perhaps that the sharp daily falls of February 2 and 3 have not been made up since.
The market is also getting close to a downtrend line established from the highs of July 12. That has survived a few tests in 2024 and now offers resistance to Sterling bulls at 1.27424.
GBP/USD’s Relative Strength Index looks neutral at just below the 40 level but has been trending notably lower since November. This suggests a market quite comfortable at current levels, but more likely to veer towards overselling.
| Change in | Longs | Shorts | OI |
| Daily | -2% | -10% | -5% |
| Weekly | -19% | 33% | -3% |
--By David Cottle For DailyFX
