GBP/USD Forecast: RSI Attempts to Climb Out from Oversold Territory

British Pound Outlook: GBP/USD

GBP/USD continues to bounce back from a fresh monthly low (1.2111) to halt a six-day decline, and a move above 30 in the Relative Strength Index (RSI) may accompany a near-term rebound in the exchange rate like the price action from last year.

GBP/USD Forecast: RSI Attempts to Climb Out from Oversold Territory

GBP/USD snaps the series of lower highs and lows carried over from the previous week despite the ongoing rise in long-term Treasury yields, and data prints coming out of the US may lead to a larger rebound in the exchange rate as the Personal Consumption Expenditure (PCE) Price Index is anticipated to show slowing inflation.

Join David Song for the Weekly Fundamental Market Outlook webinar. David provides a market overview and takes questions in real-time. Register Here

US Economic Calendar

FOREX.com Economic Calendar

The core PCE, the Federal Reserve’s preferred gauge for inflation, is expected to narrow to 3.9% in August from 4.2% per annum the month prior, and evidence of easing price pressures may produce headwinds for the Greenback as it encourages the Fed to retain the current policy.

Nevertheless, a stronger-than-expected PCE report may drag on GBP/USD as it puts pressure on the Federal Open Market Committee (FOMC) to carry out a more restrictive policy, and Chairman Jerome Powell and Co. may continue to show a greater willingness to keep US interest rates higher for longer as inflation remains above the 2% target.

In turn, the outlook for GBP/USD may continue to evolve as the Bank of England (BoE) votes 5-4 to keep UK interest rates on hold, and the exchange rate may exhibit a bearish trend over the remainder of the year if it tracks the negative slope in the 50-Day SMA (1.2600).

With that said, GBP/USD may stage a larger rebound ahead of October as it snaps the series of lower highs and lows carried over from the previous week, and a move above 30 in the Relative Strength Index (RSI) may accompany a near-term rebound in the exchange rate like the price action from last year.

GBP/USD Price Chart –Daily

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

• The head-and-shoulders pattern from earlier this year appears to have run its course as GBP/USD halts as six-day decline, and the bearish momentum may continue to abate as the Relative Strength Index (RSI) attempts to climb out of oversold territory.
• A move above 30 in the RSI may keep GBP/USD above 1.2090 (78.6% Fibonacci retracement), with a break/close above the 1.2300 (50% Fibonacci retracement) to 1.2390 (38.2% Fibonacci extension) region bringing the 1.2470 (50% Fibonacci retracement) to 1.2520 (23.6% Fibonacci extension) zone back on the radar.
• However, GBP/USD may struggle to hold its ground as long as the RSI holds below 30, with a break/close below 1.2090 (78.6% Fibonacci retracement) opening up the 1.1780 (50% Fibonacci extension) to 1.1840 (38.2% Fibonacci retracement) area, which incorporates the March low (1.1803).

Additional Market Outlooks

Australian Dollar Forecast: AUD/USD Range Breaks Down

EUR/USD Forecast: RSI Flirts with Oversold Zone Ahead of Euro Area CPI

--- Written by David Song, Strategist

Follow on Twitter at @DavidJSong