GBP/USD analysis: Currency Pair of the Week – January 15, 2024

GBP/USD analysis: What’s next for the pound?
Looking ahead: UK wages, CPI and retail sales among key data highlights
GBP/USD technical analysis suggests bullish trend intact

Thanks to the Martin Luther King Day holiday, FX markets were quiet-ish on Monday without the participation of US banks. But things should start to pick up from Tuesday onwards. We are going to have some potentially market-moving macro data from around the world to look forward to later this week. Among these macro pointers, we will have some important UK data too, including CPI, wages and retail sales, making the GBP/USD the currency pair of the week.

GBP/USD analysis: What’s next for the pound?

Concerns over the UK economy have mostly been ignored by FX traders. They have been happy to buy the GBP dips against all major currencies, especially the under-performing commodity dollars. But even against the US dollar, the pound has been able to hold its own well. The GBP/USD has spent several weeks consolidating its sharp gains made at the back end of last year, holding just below the 1.28 resistance level.

The reason why the pound has remained supported despite macro worries in the UK is the fact that the Bank of England has remained in the hawkish camp relative to a growing number of other central banks who have recently turned dovish. The BoE’s relatively more hawkish stance is due to the comparatively higher inflation in the UK than other major economies.

As a result, inflation data will be very important to watch this week, but don’t forget about wages and other UK data as well.

Looking ahead to the rest of the week

As mentioned, we will have some important UK wages and inflation (and retail sales) data for December coming up this week, which should provide more clarity on potential interest rate cuts from the Bank of England. From the US, this week’s data highlights include retail sales and consumer confidence on Friday. Here are the key macro events relevant to the GBP/USD to watch this week:

GBP/USD analysis: Key levels to watch

The trend on the GBP/USD remains bullish given an upwardly sloping 200-day moving average and the fact price is holding well above it. The 21-day exponential is also above the 200 MA, which means the trend is clearly bullish. The first line of defence for the bulls is seen around the 1.2700 area, where the 21-day eMA meets prior resistance and support. Below this level 1.2615ish.

Resistance comes in at 1.2800, which has been a tough nut to crack. A convincing break above here should clear the way for follow-up technical buying towards the next milestone at 1.3000.

Source for all charts used in this article: TradingView.com

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

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