GBP/USD Daily Chart Analysis – 2024-04-17

Technical Analysis: GBP/USD closed modestly down at 1.2425, reflecting a contraction within the day’s range of 1.2465-1.2410. Technical momentum indicates persistent bearish bias as the pair tests a five-month low. This bearish sentiment was evident despite the pair’s initial rise on positive UK payroll and wage data, suggesting that technicals overrode the fundamentals in the session.

The price action demonstrates a clear break below the pivotal support level of 1.2464, with subsequent support eyed around the five-month low at 1.2402. The pair’s inability to sustain gains above key technical levels, such as the 1.2475 Fibonacci retracement, signals that bearish forces remain in control.

Fundamental Analysis: Fundamentally, the pound’s vulnerability is compounded by anticipations of UK inflation data. With the UK Consumer Price Index (CPI) and Producer Price Index (PPI) releases due Wednesday, the market braces for potential exacerbation of inflationary pressures, which could inform the Bank of England’s (BoE) monetary policy stance.

Overall Market Sentiment: The overarching market sentiment for GBP/USD is cautiously bearish, factoring in the impending inflation data and the currency pair’s technical posture.

Sentiment Percentage Breakdown:

• 20% Positive: Given the short-lived boost from UK employment data, a minor optimistic sentiment prevails, suggesting potential for a short-term recovery.
• 30% Neutral: Reflecting a wait-and-see approach ahead of the UK inflation data release, which will provide a clearer direction.
• 50% Negative: Dominated by technical breakdowns and overarching USD strength, the bearish sentiment reflects concerns over persistent inflation and its implications for BoE policy.

The negative sentiment stems from the technical indicators and the broader USD strength fueled by rising UST yields. The market’s neutral stance is due to upcoming key economic releases, which may pivot the current trend. The positive sentiment is subdued, supported only by the possibility that upcoming inflation data may not exacerbate the pound’s weakness, offering a respite from the current downtrend.