GBP/USD Nears Monthly Low as Fed Maintain Interest Rate Firmness
Güncellendi
The Pound Sterling (GBP) continued its decline against the US Dollar (USD) for the third consecutive trading day on Monday. The GBP/USD pair is currently hovering near its monthly low, around 1.2660, as the Federal Reserve’s (Fed) hawkish stance on interest rates maintains the US Dollar's strength.
Fundamental Analysis
Federal Reserve's Interest Rate Outlook
The Fed's current position is to reduce interest rates only once this year. However, financial markets are speculating that the Fed might implement two rate cuts and begin unwinding its restrictive policy framework starting from the September meeting, with potential subsequent cuts in November or December. This speculation is driven by the soft US Consumer Price Index (CPI) and Producer Price Index (PPI) reports for May, which have increased expectations for early rate cuts.
Impact on GBP/USD
The Fed’s firm stance on maintaining higher interest rates supports the US Dollar's appeal, exerting downward pressure on the GBP/USD pair. Despite the market's expectations for rate cuts, the immediate outlook for the USD remains strong, making it difficult for the GBP to gain ground.
Technical Analysis
Divergence and Support Levels
Despite the bearish trend, technical analysis reveals that the GBP/USD pair is showing a divergence on the H4 timeframe. Divergence occurs when the price movement contradicts the signal from technical indicators, often suggesting a potential reversal or slowdown in the current trend.
The current price action is also situated in a demand area of support, which aligns with the 50% and 61.8% Fibonacci retracement levels. These Fibonacci levels are commonly used to identify potential support and resistance zones where price reversals might occur.
Trading Strategy
Given the technical setup, we have identified a range area where the price is currently trading. Although the pair has seen a significant drop, the divergence and support confluence suggest a potential for a reversal or at least a temporary stabilization.
To manage risk effectively, a stop loss is placed just below the 50% and 61.8% Fibonacci support levels. This ensures that if the price breaks through these key support areas, it signals a clear change in the main trend, and the trade can be exited with minimal losses.
Fundamental Analysis
Federal Reserve's Interest Rate Outlook
The Fed's current position is to reduce interest rates only once this year. However, financial markets are speculating that the Fed might implement two rate cuts and begin unwinding its restrictive policy framework starting from the September meeting, with potential subsequent cuts in November or December. This speculation is driven by the soft US Consumer Price Index (CPI) and Producer Price Index (PPI) reports for May, which have increased expectations for early rate cuts.
Impact on GBP/USD
The Fed’s firm stance on maintaining higher interest rates supports the US Dollar's appeal, exerting downward pressure on the GBP/USD pair. Despite the market's expectations for rate cuts, the immediate outlook for the USD remains strong, making it difficult for the GBP to gain ground.
Technical Analysis
Divergence and Support Levels
Despite the bearish trend, technical analysis reveals that the GBP/USD pair is showing a divergence on the H4 timeframe. Divergence occurs when the price movement contradicts the signal from technical indicators, often suggesting a potential reversal or slowdown in the current trend.
The current price action is also situated in a demand area of support, which aligns with the 50% and 61.8% Fibonacci retracement levels. These Fibonacci levels are commonly used to identify potential support and resistance zones where price reversals might occur.
Trading Strategy
Given the technical setup, we have identified a range area where the price is currently trading. Although the pair has seen a significant drop, the divergence and support confluence suggest a potential for a reversal or at least a temporary stabilization.
To manage risk effectively, a stop loss is placed just below the 50% and 61.8% Fibonacci support levels. This ensures that if the price breaks through these key support areas, it signals a clear change in the main trend, and the trade can be exited with minimal losses.
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