GBP/USD Vulnerable to Head-and-Shoulders Pattern
British Pound Outlook: GBP/USD
GBP/USD registered a fresh monthly low (1.2548) last week after failing to trade back above the 50-Day SMA (1.2779), and the exchange rate may continue to give back the advance from the June low (1.2369) as a head-and-shoulders pattern appears to be unfolding.
GBP/USD Vulnerable to Head-and-Shoulders Pattern
The British Pound outperformed its US counterpart for most of 2023 as GBP/USD traded to a yearly high (1.3143) in July, but the exchange rate may no longer reflect the bullish behavior amid the flattening slope in the moving average.
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
At the same time, data prints coming out of the US may drag on GBP/USD as the update to the Personal Consumption Expenditure (PCE) Price Index, the Federal Reserve’s preferred gauge for inflation, is anticipated to show the core rate widening to 4.2% in July from 4.1% the month prior.
Signs of persistent price growth may generate a bullish reaction in the Greenback as it puts pressure on the Federal Open Market Committee (FOMC) to further combat inflation, and the Fed may prepare US households and businesses for higher interest rates as Chairman Jerome Powell reiterates that the central bank is ‘prepared to raise rates further if appropriate.’
CME Fed Watch Tool
Source: CME
In turn, speculation surrounding Fed policy may sway GBP/USD as the CME FedWatch Tool now reflects a greater than 40% probability for a 25bp rate-hike before the end of the year, but a softer-than-expected PCE print may produce headwinds for the US Dollar as FOMC seems to be nearing the end of its hiking-cycle.
With that said, developments coming out of the US may influence the near-term outlook for GBP/USD as it seems to be stuck in a narrow range, but the exchange rate may struggle to retain the advance from the June low (1.2369) as a head-and-shoulders pattern appears to be unfolding.
GBP/USD Price Chart –Daily
Chart Prepared by David Song, Strategist; GBP/USD on TradingView
- GBP/USD trades in a narrow range after registering a fresh monthly low (1.2548) during the previous week, while the 50-Day SMA (2.3779) seems to be developing a negative slope as the exchange rate struggles to trade back above the moving average.
- At the same time, a head-and-shoulders formation may unfold as GBP/USD failed to defend the opening range for August, with a break/close below 1.2520 (23.6% Fibonacci extension) raising the scope for a test of the June low (1.2369).
- Next area of interest comes in around 1.2300 (50% Fibonacci retracement) to 1.2390 (38.2% Fibonacci extension), but failure to break/close below 1.2520 (23.6% Fibonacci extension) may negate the head-and-shoulders pattern, with a move above the 1.2640 (38.2% Fibonacci extension) to 1.2650 (38.2% Fibonacci extension) region bringing the 1.2750 (50% Fibonacci retracement) to 1.2760 (61.8% Fibonacci retracement) zone on the radar.
Additional Market Outlooks
USD/JPY Pullback Keeps RSI Out of Overbought Territory
US Dollar Forecast: EUR/USD on Cusp of Testing July Low
--- 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.
© FOREX.COM 2025