US Dollar Forecast: GBP/USD Breaks Above Channel Resistance

US Dollar Outlook: GBP/USD

GBP/USD trades above channel resistance as it stages a four-day rally, and the exchange rate may continue to retrace the decline from the September high (1.2715) as the Relative Strength Index (RSI) flirts with overbought territory.

US Dollar Forecast: GBP/USD Breaks Above Channel Resistance

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

GBP/USD registers a fresh monthly high (1.2688) as it extends the series of higher highs and lows from last week, and data prints coming out of the US may keep the exchange rate afloat as the Personal Consumption Expenditure (PCE) Price Index is expected to reveal slowing inflation.

US Economic Calendar

FOREX.com Economic Calendar

The core PCE, the Federal Reserve’s preferred gauge for inflation, is seen narrowing to 3.5% in October from 3.7% per annum the month prior, and further evidence of easing price growth may drag on the Greenback as encourages the central bank to keep US interest rates on hold.

However, a higher-than-expected PCE print may curb the recent rally in GBP/USD as it puts pressure on the Federal Open Market Committee (FOMC) to further combat inflation, and it remains to be seen if Chairman Jerome Powell and Co. will adjust the forward guidance at the next interest rate decision on December 13 as the central bank is scheduled to release the updated Summary of Economic Projections (SEP).

Until then, speculation surrounding US monetary policy may sway GBP/USD as the Federal Open Market Committee (FOMC) seems to be at or nearing the end of its hiking-cycle, but recent price action raises the scope for a further advance in the exchange rate as it extends the series of higher highs and lows from last week.

With that said, GBP/USD may attempt to test the September high (1.2713) as it breaks above channel resistance, and the Relative Strength Index (RSI) may show the bullish momentum gathering pace as it flirts with overbought territory.

GBP/USD Price Chart –Daily

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

• GBP/USD seems to be breaking out of the ascending channel as it trades to a fresh monthly high (1.2688), and the exchange rate may continue to retrace the decline from the September high (1.2713) as it extends the series of higher highs and lows from last week.
• A breach above the September high (1.2715) may push GBP/USD towards 1.2760 (61.8% Fibonacci retracement), with a move above 70 in the Relative Strength Index (RSI) likely to be accompanied by a further advance in the exchange rate like the price action from earlier this year.
• Next area of interest coming in around 1.2830 (23.6% Fibonacci retracement) to 1.2900 (23.6% Fibonacci retracement), which incorporates the August high (1.2842), but failure to breach the September high (1.2713) may curb the bullish price series in GBP/USD.
• A move below 1.2630 (38.2% Fibonacci retracement) may push GBP/USD back below channel resistance, with the first region of interest coming in around 1.2470 (50% Fibonacci retracement) followed by the 1.2300 (50% Fibonacci retracement) to 1.2390 (38.2% Fibonacci extension) area.

Additional Market Outlooks

US Dollar Forecast: USD/JPY Struggles to Trade Back Above 50-Day SMA

AUD/USD Rate Climbs Above 200-Day SMA for First Time Since July

--- Written by David Song, Strategist

Follow on Twitter at @DavidJSong