GBP/USD Daily Chart Analysis – 2024-03-04

Technical Analysis:

The GBP/USD pair has been trading within a tight range from 1.2656 to 1.2667, indicating a period of consolidation. The moving averages show conflicting signals with the 5 and 10-day moving averages (DMAs) presenting no clear trend and the 21-day Bollinger bands suggesting increasing volatility. Momentum indicators have flattened, implying a lack of strong directional bias in the daily charts.

The support and resistance levels formed by last week’s price action are at 1.2600 and 1.2681, respectively. These levels serve as immediate boundaries for the pair’s short-term movements. The broader range that has been established since late November, from 1.2500 to 1.2800, remains intact, suggesting that the pair is in a phase of longer-term consolidation.

Fundamental Analysis: Fundamentally, with no significant UK economic data releases or Bank of England communications scheduled for the day, the pair’s movements are likely to be driven by external factors, such as the general risk sentiment and fluctuations in the US dollar. The upcoming UK budget on March 6th represents a significant event risk that could introduce volatility and provide directional impetus for sterling.

Overall Market Sentiment: The market sentiment for GBP/USD can be broken down as follows:

• 50% Neutral: The prevailing sentiment is neutral, reflecting the pair’s range-bound trading and the market’s anticipation of the upcoming UK budget for directional cues.
• 40% Positive: There is a cautiously optimistic sentiment supported by the pair’s bounce off recent lows and consistent buying interest, suggesting underlying support for sterling.
• 10% Negative: A minor negative sentiment persists, recognizing the potential for unexpected offshore developments or surprises in the forthcoming UK budget to disrupt the current trading range.

The neutral sentiment is dominant due to the absence of significant domestic drivers, leading to a reliance on broader market trends. The positive sentiment is bolstered by the pair’s resilience and the potential for favorable shifts in risk appetite. The negative sentiment accounts for the uncertainty surrounding external factors and the anticipation of the UK budget, which could impact sterling’s valuation.