US Dollar Forecast: GBP/USD Falls Toward Channel Support

US Dollar Outlook: GBP/USD

GBP/USD trades back within the ascending channel from earlier this year as it slips to a fresh monthly low (1.2502), and the exchange rate may fall towards channel support as the Relative Strength Index (RSI) continues to fall back from overbought territory.

US Dollar Forecast: GBP/USD Falls Toward Channel Support

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GBP/USD continues to carve a series of lower highs and lows after failing to test the November high (1.2733), while a textbook sell-signal emerged in the RSI as the oscillator fell back below 70.

As a result, recent price action may lead to a further decline in GBP/USD as it remains under pressure following the 199K rise in US Non-Farm Payrolls (NFP), and developments coming out of the US may continue to influence the exchange rate as the Consumer Price Index (CPI) is anticipated to show sticky inflation.

US Economic Calendar

FOREX.com Economic Calendar

Even though the headline CPI is expected to narrow to 3.1% in November from 3.2% per annum the month prior, the core rate of inflation is anticipated to hold steady at 4.0% during the same period.

Evidence of persistent price growth may generate a bullish reaction in the US Dollar as it puts pressure on the Federal Reserve to further combat inflation, but a softer-than-expected CPI report may curb the recent decline in GBP/USD as it raises the central bank’s scope to keep US interest rates unchanged.

With that said, GBP/USD may face increased volatility ahead of the Federal Open Market Committee (FOMC) interest rate decision on December 13, but the exchange rate may fall towards channel support as it continues to carve a series of lower highs and lows.

GBP/USD Price Chart –Daily

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

• GBP/USD trades back within the ascending channel from earlier this year as it carves a series of lower highs and lows, and the exchange rate may track the bullish trend should it responds to the positive slope in the 50-Day SMA (1.2340).
• Failure to push below 1.2470 (50% Fibonacci retracement) may keep GBP/USD within the ascending channel, but need a move back above 1.2630 (38.2% Fibonacci retracement) to bring the November high 1.2733) back on the radar.
• At the same time, a break/close below 1.2470 (50% Fibonacci retracement) may coincide with a breach of channel support, with the next area of interest coming in around 1.2300 (50% Fibonacci retracement) to 1.2390 (38.2% Fibonacci extension).

Additional Market Outlooks

US Dollar Forecast: EUR/USD Halts Six-Day Selloff Ahead of US NFP

USD/CAD Unfazed by BoC Rate Decision with US NFP Report on Tap

--- Written by David Song, Strategist

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