US Dollar Forecast: GBP/USD Rebounds within Ascending Channel

US Dollar Outlook: GBP/USD

GBP/USD holds within the ascending channel from last year as it retraces the decline from the start of the week, and the exchange rate may stage another attempt to test the August high (1.2842) as it snaps the series of lower highs and lows from last week.

US Dollar Forecast: GBP/USD Rebounds within Ascending Channel

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GBP/USD seems to be defending the advance following the Federal Reserve interest rate decision as it recovers ahead of channel support, but fresh data prints coming out of the US may curb the recent rebound in the exchange rate as the Non-Farm Payrolls (NFP) report is anticipated to show another rise in employment.

US Economic Calendar

FOREX.com Economic Calendar

The US economy is projected to add 170K jobs in December following the 199K expansion the month prior, and signs of a robust labor market may generate a bullish reaction in the Greenback as it puts pressure on the Fed to keep interest rates higher for longer.

However, a weaker-than-expected NFP print may push the Federal Open Market Committee (FOMC) to implement a rate cut sooner rather than later as Chairman Jerome Powell and Co. indicate that ‘a lower target range for the federal funds rate would be appropriate by the end of 2024.’

In turn, the US Dollar may face headwinds ahead of the Fed rate decision on January 31 as the central bank alters the forward guidance for monetary policy, and GBP/USD may attempt to retrace the decline from the December high (1.2828) as it holds within the ascending channel from last year.

With that said, GBP/USD may stage another attempt to test the August high (1.2842) as it clears the bearish price action from last week, but the exchange rate may struggle to retain the advance from the December low (1.2500) if it fails to hold within the ascending channel from last year.

GBP/USD Price Chart –Daily

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

• The opening range for 2024 is in focus as GBP/USD rebounds ahead of channel support to snap the series of lower highs and lows from last week.
• A move above 1.2760 (61.8% Fibonacci retracement) to 1.2830 (23.6% Fibonacci retracement) region brings the August high (1.2842) on the radar, with the next area of interest coming in around 1.2900 (23.6% Fibonacci retracement).
• However, lack of momentum to trade back above the 1.2760 (61.8% Fibonacci retracement) to 1.2830 (23.6% Fibonacci retracement) region may curb the recent rebound in GBP/USD, and the exchange rate may threaten the ascending channel from last year if it fails to hold above the monthly low (1.2611).
• A breach of channel support may push GBP/USD towards the December low (1.2500), with the next area of interest coming in around 1.2470 (50% Fibonacci retracement).

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--- Written by David Song, Strategist

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