GBP/USD Trades Below 200-Day SMA for First Time Since May

British Pound Forecast: GBP/USD

GBP/USD continues to carve a series of lower highs and lows after failing to hold within the opening range for November, and the exchange rate appears to be on track to test the June low (1.2613) as it no longer tracks the positive slope in the 200-Day SMA (1.2820).

GBP/USD Trades Below 200-Day SMA for First Time Since May

The bearish price series in GBP/USD may persist as it trades below the long-term moving average for the first time May, and a further decline in the exchange rate may push the Relative Strength Index (RSI) into oversold territory for the first time since April.

At the same time, lack of momentum to test the June low (1.2613) may keep the RSI above 30, but the US Retail Sales report may sway GBP/USD as the update is anticipated to show another rise in consumer spending.

US Economic Calendar

US Retail Sales are projected to increase 0.3% in October after climbing 0.4% the month prior, and a positive development may push the Federal Reserve to the sidelines following the 25bp rate-cut at the November meeting.

In turn, waning expectations for another Fed rate-cut may fuel the recent selloff in GBP/USD, but a dismal Retail Sales report may produce headwinds for the US Dollar as it encourages the Federal Open Market Committee (FOMC) to further unwind its restrictive policy.

With that said, GBP/USD may attempt to retrace the decline from the start of the week if it struggles to test the June low (1.2613), but a move below 30 in the RSI is likely to be accompanied by a further decline in the exchange rate like the price action from earlier this year.

GBP/USD Price Chart –Daily

Chart Prepared by David Song, Strategist; GBP/USD on TradingView

• GBP/USD trades to a fresh monthly low (1.2630) as it falls for the fifth consecutive day, with a breach below the June low (1.2613) raising the scope for a move towards the May low (1.2446).
• Next area of interest comes in around 1.2300 (50% Fibonacci retracement) to 1.2390 (38.2% Fibonacci extension), which incorporates the yearly low (1.2300) but failure to test the June low (1.2613) may curb the recent series of lower highs and lows.
• Need a move back above the 1.2710 (23.6% Fibonacci extension) to 1.2760 (61.8% Fibonacci retracement) region for GBP/USD to snap the bearish price series, with a move above 1.2820 (38.2% Fibonacci extension) bringing the 1.2900 (23.6% Fibonacci retracement) to 1.2910 (50% Fibonacci extension) zone back on the radar.

Additional Market Outlooks

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AUD/USD Vulnerable amid Break Below November Opening Range

US Dollar Forecast: USD/CAD on Cusp of Testing 2022 High

--- Written by David Song, Senior Strategist

Follow on Twitter at @DavidJSong