GBP/USD Daily Chart Analysis – 2024-02-29

Technical Analysis: Technically, GBP/USD experienced a pullback from the pivotal 1.27 resistance level, with recent North American trading sessions marking a -0.20% change at 1.2650. The trading range for Wednesday was between 1.2680 and 1.2620. This level of resistance is underscored by the = high at 1.2701, the daily cloud top at 1.2708, and the February 22 high at 1.2710. These levels have proven to be significant barriers for sterling’s advance, with more formidable resistance noted at the January 12, 2024

On the support side, the 200-Day Moving Average (HMA) at 1.264-, the Wednesday low at 1.2620, and the 200-Day Moving Average (DMA) at 1.2560 are key levels that could provide a floor for the currency pair. The Momentum indicator remains positive, though the Relative Strength Index (RSI) has retreated from higher levels, indicating a loss of some bullish momentum.

Fundamental Analysis: Fundamentally, the market’s attention is focused on the upcoming U.S. core Personal Consumption Expenditures (PCE) price index release, which is a closely watched indicator for inflation and could provide clues on the Federal Reserve’s rate path. Sterling’s movements have also been influenced by month-end flows, which currently favor broad USD buying, and dovish global rate tones, as central banks signal a cautious approach to rate hikes.

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

• 40% Positive: A tempered positive sentiment is maintained by the pair’s ability to hold above key support levels and the potential for upside if inflation data is supportive.
• 50% Neutral: The majority sentiment is neutral, reflecting the pair’s hesitancy to firmly break the 1.27 resistance amid month-end flows and awaiting directional cues from inflation data.
• 10% Negative: There is a cautious negative sentiment considering the repeated failure to breach the 1.27 level, which might suggest a lack of bullish conviction.

The positive sentiment is cautious due to the proximity to significant resistance levels and the potential for a dovish shift in global rate expectations to weigh on the pound. The neutral sentiment captures the market’s wait-and-see attitude ahead of the U.S. core PCE price index release, which is anticipated to set the tone for near-term price action. The negative sentiment is minimal, acknowledging that the 1.27 resistance has been formidable and may continue to cap gains in the short term.