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GBP/USD Holds Steady Above 1.2100, Eyes US PCE for Momentum

GBP and USD Holds Steady Above 1.2100

GBP/USD remains steady, trading above the key level of 1.2100 as early Friday in Europe bringing a mix of factors influencing the market. Despite broad US Dollar weakness and generally positive risk sentiment, the pair struggles to gain strong support. Geopolitical tensions in the Middle East continue to cast a shadow. As the day progresses, all eyes turn to the upcoming US PCE inflation data for a fresh direction.

GBP And USD Holds Ground Above 1.2100

The Relative Strength Index (RSI) on the four-hour chart indicates that GBP/USD, though under pressure, has some room to decline further before becoming technically oversold. Notably, the level at 1.2050, marking the end-point of the recent downtrend, stands as a critical support level. A decisive 4-hour close beneath this point could open the door for a more significant slide toward 1.2000, a level both static and psychological.

Technical Outlook Favors GBP/USD Downside

Looking to the north, the initial hurdle for GBP and USD lies at 1.2100, which serves as a psychological and static level of resistance. Further resistance can be expected at 1.2150, another static point, and in the range of 1.2170-1.2180, where the 50-period Simple Moving Average (SMA) and the 100-period SMA converge.

Middle East Tensions Impact Markets

Geopolitical tensions in the Middle East are weighing heavily on investor sentiment. News of Israeli military preparations for a possible ground incursion into the Gaza region has rekindled concerns about a deepening crisis in the region. As a result, risk-averse investors have sought refuge, driving the US Dollar’s performance ahead.

Read More: US GDP Surge 4.9% as Consumers and Government Go Large

US Economic Data in Focus

Later today, market participants will closely monitor the release of third-quarter Gross Domestic Product (GDP) data from the United States. Previously, robust PMI readings had affirmed the resilience of the US economy, bolstering the US Dollar. Therefore, a GBP and USD growth figure exceeding expectations could similarly boost the Dollar. However, if the data disappoints, it might lead investors to anticipate no changes in the Federal Reserve’s (Fed) policy rate for 2023, potentially diminishing the Dollar’s appeal.

Fed Rate Hike Speculations

Market speculations surrounding the Fed’s future actions are relevant. The CME Group FedWatch Tool indicates that there is almost a 30% probability of an additional Fed rate hike in December. This figure can significantly impact the Dollar’s trajectory.

In addition, the European Central Bank (ECB) is set to announce its monetary policy decisions. A dovish stance from the ECB could exert downward pressure on the EUR/GBP pair, consequently helping Pound Sterling maintain its position against the US Dollar.

With GBP/USD teetering at 1.2100, it remains to be seen how the upcoming data and geopolitical developments will steer its course in the forex market.

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Please note that this article serves solely for informational purposes. As such, it is not financial advice. We strongly advise readers to conduct thorough research and consult with financial professionals before making any investment decisions.

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