Fundamental factors support GBPUSD

05 December 2023 97
Fundamental factors support GBPUSD

On Tuesday, the dollar recovered its positions in the GBPUSD pair, reaching the support at 1.2603. According to Sean Callow of Westpac, the US currency strengthened partly due to a pullback after a strong decline in recent weeks. The dollar index fell 3% in November, marking the sharpest monthly decline in a year.

 

US economic indicators, including November's non-manufacturing ISM figures and the nonfarm payrolls report, will provide further clarity on the future path of interest rates.

 

According to Reuters, the US Federal Reserve will end the current year with a pause in interest rate hikes. However, the regulator will face the challenge of when and how to signal a turn to rate cuts to investors, politicians and the public.

 

US inflation is still well above the Fed's 2% target. The regulator therefore remains concerned that inflation rate could accelerate its growth. The Fed seeks to maintain flexibility and the ability to choose the right policy course in the face of uncertainty. Despite this, the Fed members believe that the range of the federal funds rate of 5.25-5.5% is sufficient to stabilize the economy and reduce inflation, the agency said.

 

At the final meeting of the central bank this year on December 12–13, officials will give signals on the course of monetary policy for 2024.

 

Meanwhile, the U.K. is experiencing high inflation, higher than in the U.S. and the European Union. Catherine Mann, a member of the Bank of England's Board of Directors, last week suggested that policy tightening is needed to ensure inflation remains stable. She emphasized that the current level of rates doesn’t guarantee that the goal of lowering inflation will be achieved.

 

The GBPUSD pair is forming a new uptrend on the D1 timeframe.

 

In terms of wave analysis, the quotes are forming the third ascending wave on the H1 timeframe. Breaking through the top of the first wave at 1.2733 will strengthen the upward movement.

 

Signal:

The short-term outlook for the GBPUSD pair is to buy.  

The target is at the level of 1.2900.

Part of the profit should be fixed near the level of 1.2730.

A Stop-loss should be placed near the level of 1.2545.

 

The bullish trend is of a short-term nature, so it is suggested to limit the trading volume to no more than 2% of your capital.

This content is for informational purposes only and is not intended to be investing advice.

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