- The pound sterling began trading in 2024 on a positive note, but strong technical resistance and three key data releases in the UK suggest that the downside risks are elevated in the coming days.
- Last week, the pound sterling rose against the US dollar, but the pair struggled to break through the 1.28 resistance level significantly, due to heavy resistance in the early 1.28s.
- Currently, it is trading around 1.2730 at the time of writing.
What is Expected for the British Dollar in the Coming Days?
In this regard, Roberto Milic, Forex analyst at UniCredit, says: “It is much higher than the resistance of 1.27, but it is still unable to rise above 1.28.” For his part, Thomas Florey, Forex analyst at UBS, says: “GBP/USD stabilized around the 1.27 level. He added, “With the lack of positive catalysts and strong resistance levels around 1.28-1.30, we believe the pair is likely to trade in a narrow range with risks skewed to the downside.”
For his part, Tanmay Purohit, a technical analyst at Societe Generale Bank, says that the pound has witnessed a steady recovery after breaking out from a small base in November. Also, he adds that the movement stopped near the potential obstacle at the 1.2820-1.2880 areas, which represents the highest level recorded last August and the 76.4 Fibonacci retracement level from July 2023. He Added, “There is a pause currently but the recent pivot bottom near 1.2500 should be support.” Important in the near term.” “A break below this level will be necessary to confirm the extended downward movement.” In the medium term, the analyst says that the pound is expected to gradually move upward towards the 1.2820-1.2880 areas, and a move above this area could lead to a continued upward trend towards the highest level recorded in July 2023 at 1.3140.
Meanwhile, the price of the British pound enters trading this week as the best-performing currency for the year 2024, and the US dollar comes in second place. Both the dollar and the pound have benefited from a “tightening” repricing in the central bank’s expectations, with investors lowering their expectations about the size of interest rate cuts that are likely to be implemented in 2024. Thus, This has resulted from a series of resilient data from the United States. And Britain in recent weeks. On this front, the British pound will be in the spotlight over the coming days, given the busy schedule to navigate.
Tuesday sees the release of UK pay data, with consensus set to read 6.6% year-on-year in the three months to November. When bonuses are included, the expected figure is 6.8%, both of which represent a slowdown in wage growth from the previous reading. Therefore, note that the ONS does not release the full employment report, meaning the market's focus is squarely on wages. Consequently, we expect investors to buy sterling if earnings beat expectations, as this reduces the likelihood of an early interest rate cut at the Bank of England.
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Tomorrow, Wednesday, sees the release of inflation figures in the UK, with the consensus looking for a reading of 3.8% year-on-year in December, down from 3.9%. Expectedly, the core CPI reading is to be 4.9%, down from 5.1%. If the data beats expectations, the pound could rise as markets reduce bets on an interest rate cut. Significantly, it was noted that inflation was lower than expectations in the past two rounds, and we would not be surprised if the pound sterling ended the mid-week session on a recurring decline. Friday sees the release of UK retail sales for December, with expectations for an expansion of 1.1% year-on-year, with the monthly figure at -0.5%. Furthermore, exceeding expectations will indicate that the UK economy has finished the year with momentum, which will support the price of the pound.
On the US dollar front, Wednesday will witness the release of US retail sales at 13:30 GMT, which should give an indication of the strength of the consumer base, which is a crucial element in US inflation expectations. Also, markets expect retail sales to rise by 0.3% month-on-month in December, with any major surprise likely to support the dollar.
Thursday will see US new home data released at 1:30 GMT, with the market expecting new homes to start at a rate of 1.45 million per month in December. At the same time, US weekly unemployment claims will be announced, where they are expected to reach 207 thousand claims. This version tends to give a view on how the labor market is evolving. Recently, the US labor market has been slowing steadily but is nonetheless still strong and continues to frustrate dollar speculators looking for imminent interest rate cuts from the Federal Reserve. Shortly, US dollar price may remain supported in light of another strong reading.
GBPUSD Expectations and Analysis Today:
According to the performance on the daily chart above, the upward momentum for the GBP/USD currency pair remains, and the control of the stronger bulls will remain as long as it remains stable above the 1.2750 resistance. After the end of the American holiday and the start of the announcement of a package of British economic data from today, the currency pair will react. Therefore, if the bulls gained additional momentum, as the currency pair may move towards the next resistance levels of 1.2785 and 1.2850, the latter of which paves the way for a move towards the psychological resistance level of 1.3000. Over the same period of time, it will not be the currency pair abandons the current upward path without first moving towards the support level of 1.2620.
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