GBP/USD Daily Chart Analysis – 2023-12-14

Sterling experienced a rebound, fueled by a dovish stance from the Federal Reserve, which overshadowed earlier losses triggered by disappointing UK economic data. The currency’s rise came despite a drop in UK GDP, trade deficits, and industrial production figures. Looking ahead, the Bank of England’s upcoming meeting is anticipated to hold interest rates steady, with expectations of fewer than three votes in favor of a hike. Market futures are leaning towards an interest rate cut by May and a decrease of a full percent by the end of 2024, although it is unlikely that the Bank of England will confirm such aggressive cuts in its forthcoming meeting. The focus remains on the BoE’s assessment of the economy, given the recent weak data and the context of persistently high inflation within the UK.

 The pair has shown a notable surge, breaking through a consolidation phase which is evidenced by a tight range of trading before the upward movement. The break above the consolidation area coincides with a significant increase in volume, suggesting that the breakout is backed by substantial trading interest. The price has crossed above several key moving averages, which have acted as dynamic resistance levels during the consolidation phase and may now serve as support on any pullbacks. The momentum of the move is further confirmed by the Relative Strength Index (RSI), which has risen sharply towards the overbought territory but has not yet crossed the threshold that typically indicates overbought conditions.

The Fibonacci retracement tool applied to a recent swing high and low shows that the price is currently testing the 61.8% retracement level at 1.26349, which is a critical juncture that often decides whether the retracement will continue or the price will revert back to the prevailing trend. The bullish momentum is also depicted by the momentum indicator, which has been ascending and is now at higher levels, suggesting increasing buying pressure. The chart points out potential future resistance levels at the Fibonacci extension points of 0.786 (1.27312) and beyond. Traders will likely monitor these levels for signs of resistance or breakthrough for further directional bias. The current price is around 1.26380, and the immediate price action will determine whether the bullish trend will persist or face a reversal at these critical technical levels.