GBP/USD Daily Chart Analysis – 2024-02-22

The GBP/USD currency pair is exhibiting an upward trajectory, approaching key resistance levels, as the market digests recent Federal Reserve communications and anticipates key inflation data.  The GBP/USD pair has been trending upwards, indicated by its position above both the 50 and 200-day moving averages, which is typically a bullish signal. The pair has drifted towards session highs, with an increase of 0.1% at 1.2630, displaying a consistent upward momentum. Key resistance levels are identified at the daily moving average of 1.2650 and a recent high at 1.2667. The chart shows that the pair has surpassed the 0.786 Fibonacci retracement level of the recent decline, suggesting a potential continuation of the bullish trend if the resistance is breached. Support levels are noted at the session low of 1.2609 and the psychological barrier at 1.2600. The momentum indicators are positive, with the RSI above the mid-point, reflecting the current bullish sentiment.

The release of the Federal Reserve’s meeting minutes offered no new policy clues but was perceived as slightly less dovish, tempering expectations of aggressive hawkish policy moves. The discussions around a slower balance sheet runoff have moderated the hawkish sentiment that was previously priced into the market. The direction of both the Bank of England (BoE) and the Federal Reserve’s policies continues to hinge on forthcoming US and UK inflation data, which remains a focal point for traders.

Overall Market Sentiment: The prevailing market sentiment for GBP/USD is cautiously optimistic, with a focus on resistance levels and upcoming economic data:

• 60% Positive: This sentiment reflects the pair’s technical strength above key moving averages and approaching resistance levels, suggesting a continued bullish outlook.
• 30% Neutral: A sizeable portion of the market remains neutral, recognizing the importance of upcoming inflation data which could significantly impact the currency pair’s direction.
• 10% Negative: There is a minor negative sentiment based on the potential for the resistance levels to hold and for the upcoming economic data to not favor the pound.

The positive sentiment is primarily due to the technical indicators pointing towards an ongoing bullish trend. The neutral sentiment acknowledges the market’s wait-and-see approach in anticipation of key economic indicators that could shift sentiment. The negative sentiment accounts for the possibility of a reversal should the resistance levels prove formidable or if the inflation data does not align with the current market expectations.