GBP/USD drifts lower amid a lack of data

GBP/USD holds onto last week’s losses
A quiet economic calendar could see GBP slip lower
GBP/USD trades caught between the 20 & 200 SMA

The pound slipped lower last week for a third straight week after a mixed batch of data and is holding onto those losses on Monday as investors look ahead to a relatively quiet economic calendar ahead.

Last week, data showed that the UK economy slipped into a technical recession in the final quarter of 2023. However, a strong rebound in retail sales suggests that the recession could be shallow and short-lived if consumer strength continues.

This week sees very little in the way of economic data, with just GfK consumer confidence and PMI data in focus towards the end of the week. Investors will be watching the services PMI closely for signs of continued strength in the sector, which picked up further in January to 54.3 with a level 50 separating expansion from contraction.

Last week, Bank of England policymaker Catherine Mann and chief economist Huw Pill warned over persistent service inflation continuing to be a major concern for price pressures.

The Bank of England policymakers continue to push back against expectations of an early interest rate cut, which is helping to keep the pound relatively well supported versus the US dollar.

Meanwhile, the US dollar rose again versus its major peers in the previous week, boosted by hotter-than-expected PPI inflation. Meanwhile, Jerome Powell also said that the Fed would like to see more evidence of inflation cooling towards the 2% target before cutting rates.

Today, the US markets are closed for the Presidents Day public holiday, so trading volumes are low. The main focus will be the release of the FOMC minutes on Wednesday, which could provide further insight as to when the Federal Reserve might be considering its first rate cut. According to the CME fed watch tool, the market is pricing in the first rate cut in June.

GBP/USD forecast – technical analysis

GBP/USD trades towards the lower part of a symmetrical triangle and is caught between the 200 and 20 SMA while the RSI remains in the 40 – 60 zone, pointing to consolidation.

A breakout trade could see sellers look to break below the 200 SMA dynamic support at 1.2565, also the rising trendline support. Below here sellers will look to take out 1.25 to create a lower low and extend losses towards 1.24.

Meanwhile, buyers will look to rise above the 20 SMA at 1.2640 before testing 1.2690, last week’s high, and 1.2730, the falling trendline resistance. Above here, 1.28, the January high comes back into focus.

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.