- Summary:
- The GBPUSD currency pair is marginally above a key support, as the market expects the BoE to announce an interest rate cut this week.
GBPUSD dropped down further on Wednesday, losing 0.4 percent of its value to an eighteen-day low of 1.2813 at the time of writing. The pair ended with a red candlestick for the second week in a row last week, and today’s session underlines the pressure facing the pressure facing the pound. Both the Bank of England (BoE) Monetary Policy Committee and the Federal Reserve are slated to meet this week, with interest rate decisions in sight.
The Federal Reserve is expected to retain the current interest rates until September, after the June Personal Consumption Expenditure (PCE) Index readings showed that inflation rate reduced at a rate that largely met analysts’ expectations. The PCE index came in at 2.5 percent year-over-year to match the consensus forecast, while the Core PCE Index (excluding food and energy prices) was unchanged from May at 2.6 percent, marginally beating the forecast figure of 2.5 percent.
GBPUSD is likely to remain under pressure, as the BoE is expected to announce the first interest rate cut since 2020 following its meeting on Thursday. On the other hand, the latest PCE figures mean that an August rate cut is almost certainly off the table, but the Fed is expected to give guidance on potential rate cuts starting in September.
GBPUSD Momentum indicators
On the 4-hour GBPUSD chart, the momentum indicators favour the continuation of the downside. The price has been below the middle band on the Bollinger Bands indicator for a long period, and has recently broken below the lower band. That shows the sellers have strengthened their control, which could extend the downside.
Also, the Moving Average Convergence Divergence (MACD) indicator line has just crossed below the signal line, affirming support for the continuation of the downside.
Notably, the current rate is marginally above the 1.2800 psychological support, and the pair will need to stay above that mark to limit the downside.
Key support and resistance levels
On the 30-minute GBPUSD chart, the RSI signals control by the sellers. The sellers will likely be in control if resistance continues at 1.2827. That could see the establishment of the first support at 1.2800, beyond which extended control by the sellers could lead to further losses to test 1.2773.
That said, the RSI is at 23, which is inside the oversold territory, making a case for a potential reversal. A move above 1.2827 will signal control by the buyers. In that case, the upward momentum could encounter the first resistance at 1.2850. Furthermore, a break beyond that mark will strengthen the upside momentum, negating the downside narrative and potentially take the pair to test the second barrier at 1.2875.
