GBP/USD Rally Persists as Fed Endorses Dovish Forward Guidance

US Dollar Outlook: GBP/USD

GBP/USD trades to a fresh yearly high (1.3360) as Federal Reserve officials endorse a dovish forward guidance for monetary policy, and a move above 70 in the Relative Strength Index (RSI) is likely to be accompanied by a further advance in the exchange rate like the price action from last month.

GBP/USD Rally Persists as Fed Endorses Dovish Forward Guidance

GBP/USD stages a four-day rally as Chicago Fed President Austan Goolsbee, who serves as an alternate voting-member on the Federal Open Market Committee (FOMC) in 2024, anticipates ‘many more rate cuts over the next year’ as inflation falls toward the central bank’s 2% target.

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

Goolsbee insists that ‘if we want a soft landing, we can't be behind the curve,’ with the official going onto say that ‘rates need to come down significantly going forward’ while speaking at the National Association of State Treasurers (NAST) Annual Conference.

With that said, the US Dollar may face headwinds ahead of the next FOMC rate decision on November 7 as the central bank prepares to further unwind its restrictive policy, but GBP/USD may face a near-term pullback if the RSI struggles to push into overbought territory

GBP/USD Price Chart –Daily

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

Keep in mind, GBP/USD bounced back ahead of the 50-Day SMA (1.3008) to breakout of the bull-flag formation from earlier this month, and the exchange rate may continue to trade to fresh yearly highs as it seems to be tracking the positive slope in the moving average.
Need a break/close above 1.3410 (78.6% Fibonacci retracement) to open up the February 2022 high (1.3644), and the Relative Strength Index (RSI) may show the bullish momentum gathering pace should it climb above 70 to mirror the price action from last month.
However, lack of momentum to hold above 1.3310 (100% Fibonacci extension) may keep the RSI out of overbought territory, with a move below 1.3210 (50% Fibonacci extension) bringing the 1.3140 (78.6% Fibonacci extension) to 1.3150 (23.6% Fibonacci extension) region on the radar.

Additional Market Outlooks

Reserve Bank of Australia (RBA) Rate Decision Preview (SEP 2024)

USD/JPY Forecast: RSI Moves Away from Oversold Zone Ahead of BoJ

USD/CAD Vulnerable as Post-Fed Weakness Persists

AUD/USD on Cusp of Testing August High following Fed Rate Cut

--- Written by David Song, Strategist

Follow on Twitter at @DavidJSong

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

FOREX.com is a registered FCM and RFED with the CFTC and member of the National Futures Association (NFA # 0339826). Forex trading involves significant risk of loss and is not suitable for all investors. Full Disclosures and Risk Warning. Increased leverage increases risk.

GAIN Capital Group LLC (dba FOREX.com) 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA. GAIN Capital Group LLC is a wholly-owned subsidiary of StoneX Group Inc.