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GBP/USD Forecast: Pound Faces Resistance Amidst Economic Uncertainty

By Christopher Lewis
Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.

Notably, the recent emergence of a "death cross" in this market has caught the attention of long-term traders, who view it as a potential opportunity for selling.

  • The GBP/USD pair witnessed a significant rally during Wednesday's trading session, reflecting the ongoing volatility in the global currency markets.
  • At the forefront of this movement lies a crucial resistance level at 1.2350, which bears significance due to its history as a strong support level.
  • This 'market memory' adds an element of intrigue to the current situation.

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Data in Focus

For those closely following the currency's performance, the 1.2250 level offers a short-term support zone. The impending release of Consumer Price Index (CPI) data on Thursday is poised to send ripples through the markets, potentially causing significant fluctuations in currency values. Notably, the recent emergence of a "death cross" in this market has caught the attention of long-term traders, who view it as a potential opportunity for selling.

In the coming days, expect a heightened level of activity and noise in this market, largely driven by the eagerly awaited CPI figures. However, it's essential to not focus solely on currency market reactions but also to pay attention to the broader bond market, particularly the 10-year yield in the United States. A break above the 1.2350 resistance level could prompt the market to test higher moving averages. To accomplish this, though, a scenario where the CPI numbers significantly underperform expectations would likely be required.

Recent market events have already brought some surprises, such as the stronger-than-anticipated Producer Price Index (PPI) numbers released during the Tuesday session. Consequently, many eyes are now fixed on the CPI figures, with hopes that they might offer some relief to those who are bullish on the British pound. The United Kingdom faces its share of economic challenges, including inflation concerns and the potential for an economic slowdown. Additionally, the European Union's economic slowdown is expected to exert a drag on the UK's economy.

Taking all these factors into account, it seems probable that the market will eventually experience enough exhaustion to trigger a selling trend. However, confirmation of this scenario may depend on the outcome of the CPI data. Until then, traders and investors will be closely monitoring the evolving situation, navigating through uncertain economic waters as they weigh their positions in the British pound. Thursday should be pivotal in where we go next, but if the PPI announcement is any some kind of hint, this downtrend could continue into the end of this week, and beyond.

GBP/USD chart

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Christopher Lewis
About Christopher Lewis
Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.
 

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