GBP/USD Bull-Flag Breakout Fizzles to Keep RSI Below 70

US Dollar Outlook: GBP/USD

GBP/USD trades in a narrow range after breaking out of a bull-flag formation, but the exchange rate may attempt to test the February 2022 high (1.3644) as it appears to be tracking the positive slope in the 50-Day SMA (1.3042).

GBP/USD Bull-Flag Breakout Fizzles to Keep RSI Below 70

GBP/USD trades near the monthly high (1.3434) as the US Personal Consumption Expenditure (PCE) Price Index narrows to 2.2% in August from 2.5% per annum the month prior, with the update also showing the gauge for Personal Income increasing 0.2% during the same period versus forecasts for a 0.4% print.

Signs of easing inflation may encourage the Federal Reserve to carry out a rate-cutting cycle as the central bank ‘projects that the appropriate level of the federal funds rate will be 4.4 percent at the end of this year,’ and the US Dollar may face headwinds ahead of the next rate decision on November 7 as Chairman Jerome Powell and Co. move towards a neutral policy.

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

With that said, GBP/USD may continue to register fresh yearly highs over the remainder of 2024 as it reflects a bullish trend, but the exchange rate may consolidate over the coming days as the Relative Strength Index (RSI) struggles to push back into overbought territory.

GBP/USD Price Chart –Daily

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

The bull-flag formation in GBP/USD seems to have run its course as the exchange rate struggles to hold above 1.3410 (78.6% Fibonacci retracement), and a move below 1.3310 (100% Fibonacci extension) may keep the Relative Strength Index (RSI) below 70.
A break/close below 1.3210 (50% Fibonacci extension) brings the 1.3140 (78.6% Fibonacci extension) to 1.3150 (23.6% Fibonacci extension) region on the radar, with the next area of interest coming in around the monthly low (1.3002).
Nevertheless, GBP/USD may track the positive slope in the 50-Day SMA (1.3042) as it holds above the moving average, and a move above 70 in the RSI is likely to be accompanied by a further advance in the exchange rate like the price action from earlier this year.
In turn, GBP/USD may attempt to test the February 2022 high (1.3644), with the next area of interest coming in around the 2022 high (1.3749).

--- Written by David Song, Senior 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.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

The products and services available to you at FOREX.com will depend on your location and on which of its regulated entities holds your account.

FOREX.com is a trading name of GAIN Global Markets Inc. which is authorized and regulated by the Cayman Islands Monetary Authority under the Securities Investment Business Law of the Cayman Islands (as revised) with License number 25033.

FOREX.com may, from time to time, offer payment processing services with respect to card deposits through StoneX Financial Ltd, Moor House First Floor, 120 London Wall, London, EC2Y 5ET.

GAIN Global Markets Inc. has its principal place of business at 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA., and is a wholly-owned subsidiary of StoneX Group Inc.