US Dollar Forecast: GBP/USD Rebounds from 50-Day SMA

US Dollar Outlook: GBP/USD

GBP/USD attempts to hold above the 50-Day SMA (1.2609) as it continues to bounce back from a fresh monthly low (1.2597), but the exchange rate may struggle to retain the advance from the December low (1.2500) as it no longer trades within the ascending channel from last year.

US Dollar Forecast: GBP/USD Rebounds from 50-Day SMA

GBP/USD may no longer respond to the positive slope in the moving average as it fails to defend the opening range for January, and the exchange rate may continue to trade to fresh monthly lows as it struggles to retain the advance following the unexpected rise in the UK Consumer Price Index (CPI).

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UK Economic Calendar

FOREX.com Economic Calendar

Looking ahead, the update to the UK Retail Sales report may sway GBP/USD as household spending is projected to contract 0.5% in December following the 1.3% expansion the month prior, and a sharp slowdown in private sector consumption may drag on the British Pound as it puts pressure on the Bank of England (BoE) unwind the restrictive policy sooner rather than later.

However, a better-than-expected Retail Sales report may generate a bullish reaction in the British Pound amid the 6 to 3 split within the Monetary Policy Committee (MPC), and it remains to be seen if a growing number of BoE officials will vote a rate hike at the next meeting on February 1 as ‘further tightening in monetary policy would be required if there were evidence of more persistent inflationary pressures.’

Until then, data prints coming out of the UK and US may sway GBP/USD as the BoE and Federal Reserve retain a restrictive policy, but the exchange rate may face range bound conditions over the coming days as it struggles to trade back within the ascending channel from last year.

With that said, GBP/USD may attempt to retrace the decline from the monthly high (1.2787) as it attempts to hold above the 50-Day SMA (1.2609), but failure to defend the opening range for January may lead to a further decline in the exchange if it no longer responds to the positive slope in the moving average.

GBP/USD Price Chart –Daily

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

• GBP/USD continues to bounce back from a fresh monthly low (1.2597) to hold above the 50-Day SMA (1.2609), with a breach above the January high (1.2787) raising the scope for a test of the December high (1.2828).
• Need a break/close above the 1.2760 (61.8% Fibonacci retracement) to 1.2830 (23.6% Fibonacci retracement) region to open up the 1.2900 (23.6% Fibonacci retracement) handle, but failure to defend the opening range for January may lead to a further decline in GBP/USD should the exchange rate no longer respond to the positive slope in the moving average.
• Need a close below 1.2630 (38.2% Fibonacci retracement) to bring the December low (1.2500) on the radar, with the next area of interest coming in around 1.2470 (50% Fibonacci retracement).

Additional Market Outlooks

US Dollar Forecast: EUR/USD Fails to Hold Above January Opening Range

US Dollar Forecast: USD/JPY Ignores Negative Slope in 50-Day SMA

--- Written by David Song, Strategist

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