GBPUSD Outlook: Key Levels to Watch

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By :  ,  Market Analyst

Key Events this week:

  • UK GDP
  • U.S consumer price inflation
  • Federal Funds rate and FOMC Projections

The recent addition of 272,000 jobs in May, as reported in the latest non-farm payroll results, halted the GBPUSD’s uptrend at the 1.2821 high, with a drop towards the 1.2690 low. The market sentiment for a Fed rate cut in July has also diminished. Negative expectations for the UK GDP on Wednesday predict a drop towards 0.0%, yet the greater market focus is expected with the release of U.S price inflation figures and the Fed Fund rate and projections.

Despite negative growth indicators from last week's ISM manufacturing PMI and JOLTS Job openings, positive data from ISM services PMI and non-farm payrolls have shifted sentiment towards a possibly hawkish outlook. The Federal Funds Rate is expected to hold at 5.5%, yet FOMC projections are expected to lead the higher share of volatility.

With respect to the monthly consumer price inflation, a 0.2% drop is expected this week, with yearly and core CPI stabilizing, potentially favoring the GBPUSD’s uptrend.

GBPUSD Outlook: GBPUSD – Daily Time Frame – Logarithmic Scale

GBPUSD Outlook GBPUSD_2024-06-10_16-02-14

Bullish Outlook:

Taking the Fibonacci extension tool from the October 2023 low, March 2024 high, and April 2024 low, the potential resistance levels are the following:

• 1.2830: aligns with the 0.618 extension level

• 1.2890: aligns with the 2024 High

• 1.2970: aligns with the 0.786 extension level

Bearish Outlook:

Taking the Fibonacci retracement tool from the April 2024 low towards the June 2024 high, the potential support levels are the following:

• 1.2680: aligns with the 0.272 retracement level along with the previous trend’s wave 4

• 1.2630 area: aligns with the 0.382 retracement and May 2024 high

• 1.2560: aligns with the 50% retracement level and bottom-end of the up-trending parallel channel

With respect to the relative strength index indicator, the RSI 14 is hovering near the neutral 50-zone

The charts are gearing up for high volatility, and the 5.5% rate hold is likely to be priced in by the time of its release. The usual priced in effects are expected to set the stage for opposing trends before the subsequent FOMC speech, potentially favoring the uptrend of the GBPUSD right before the speech and projections.


--- Written by Razan Hilal, CMT

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