- Yesterday’s session was the most notable in the GBP/USD currency pair’s attempts to rebound upwards, as it moved towards the resistance level of 1.2693 from the support level of 1.2565 in the same trading session.
- Currently, it is stabilizing around the 1.2660 level at the time of writing.
- Yesterday's gains were primarily due to pressure on the US dollar's performance, as it received a package of important US economic releases.
- Also, as investors reduced their exposure to the market ahead of the US Thanksgiving holiday today, Thursday.
US Dollar Affected by Economic Data Results
The US dollar came under selling pressure after economic calendar data indicated that the Federal Reserve's preferred inflation measure would not be enough to prevent another cut in US interest rates in December. According to the announcement, the core Personal Consumption Expenditures (PCE) price index rose 0.27% in October, the largest monthly increase since March. However, the figure was slightly below expectations, which had pointed to 0.3%. Following the data results, financial markets are now betting on a 66% chance of a US interest rate cut by the Federal Reserve at the last meeting of 2024. According to Fed funds futures, up from a 63% chance on Tuesday.
These events coincide with the decline in the US dollar price ahead of today's US holiday. According to the data results, the 12-month PCE price index rose to 2.8% from 2.7% in October (and 3.4% a year ago), indicating a recent rise in inflationary pressures and should be enough to ensure the Federal Reserve maintains a cautious stance on cutting US interest rates in the coming months. This will naturally limit the weakness of the US dollar. However, in the near term, the US dollar is retreating slightly.
Analysts’ views on the performance of the US dollar
Analysts at HSBC believe that "the decline in the US dollar is also likely to reflect some unwinding of pre-US Thanksgiving holiday positioning." Also, investment bank analysts see the possibility of US dollar selling as month-end flows begin to dominate the action. These are flows created by portfolio managers who buy and sell currencies to rebalance their portfolios to account for the previous month's forex market movements. In the same context, Deutsche Bank's end-of-month model sees the possibility of US dollar weakness, noting that the moves that occurred after the elections in US assets have generated some large rebalancing signals on relative performance. Meanwhile, with demand for the EUR/USD pair and supply of the USD/SEK and USD/CHF pairs as the largest signals within their model.
Generally, the weakness of the US dollar was also expected from a technical perspective, as many analysts noted that the November rally seemed overextended and deserved a downward correction.
Overall, most analysts see USD strength as a feature of 2025. However, the pace of gains makes it look overvalued over shorter time frames, opening the door to a December setback.
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Technical Analysis for the GBP/USD pair today:
According to the performance on the daily chart above, the GBP/USD price is still at the beginning of forming an upward launch base, which means that the currency pair still lacks the strong momentum to start moving upward. Dear reader, you should take into account that the direction of the technical indicators has not turned upward yet. To start doing so, bulls should launch the GBP/USD currency pair towards the resistance levels of 1.2775 and then the psychological resistance of 1.3000 first. Otherwise, the general trend will remain bearish.
You should be cautious today as there is a holiday in the US markets, which may weaken liquidity amid traders staying away from trading screens.
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