US Dollar Forecast: GBP/USD Still Vulnerable to Test of May Low

US Dollar Outlook: GBP/USD

GBP/USD may consolidate over the remainder of the month as it no longer carves a series of lower highs and lows, but the exchange rate may attempt to test the May low (1.2446) if it fails to defend the monthly low (1.2487).

US Dollar Forecast: GBP/USD Still Vulnerable to Test of May Low

Keep in mind, the recent rebound in GBP/USD pulled the Relative Strength Index (RSI) back from oversold territory, and the oscillator may show the bearish momentum abating should it continue to hold above 30.

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In turn, GBP/USD may stage a larger recovery going into the end of November, but another move below 30 in the RSI is likely to be accompanied by a further decline in the exchange rate like the price action from earlier this year.

US Economic Calendar

At the same time, data prints coming out of the US may influence GBP/USD as the Personal Consumption Expenditure (PCE) Price Index is anticipated to show sticky inflation, with the headline reading expected to uptick to 2.3% in October from 2.1% per annum the month prior.

In addition, the core PCE, the Federal Reserve’s preferred gauge for inflation, is projected to increase to 2.8% from 2.7% during the same period, and signs of persistent price growth may force the central bank to keep US interest rates on hold at its last meeting for 2024 as the economy shows little signs of an imminent recession.

With that said, a rise in the PCE index may generate a bullish reaction in the US Dollar as it curbs speculation for a Fed rate-cut in December, but a but a softer-than-expected PCE report may keep GBP/USD afloat as the Federal Open Market Committee (FOMC) pursues a neutral stance.

GBP/USD Price Chart –Daily

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

• The recent selloff in GBP/USD seems to have stalled ahead of the May low (1.2446) as it no longer carves a series of lower highs and lows, with a break/close above the 1.2710 (23.6% Fibonacci extension) to 1.2760 (61.8% Fibonacci retracement) region raising the scope for a move towards 1.2820 (38.2% Fibonacci extension).
• Next area of interest comes in around 1.2900 (23.6% Fibonacci retracement) to 1.2910 (50% Fibonacci extension) but failure to defend the monthly low (1.2487) may push GBP/USD towards the May low (1.2446).
• A breach below the May low (1.2446) opens up 1.2390 (38.2% Fibonacci extension), with the next area of interest coming in around 1.2300 (50% Fibonacci retracement) to 1.2310 (61.8% Fibonacci extension), which incorporates the yearly low (1.2300).

Additional Market Outlooks

US Personal Consumption Expenditure (PCE) Report Preview (OCT 2024)

NZD/USD Rebounds Ahead of 2023 Low with RBNZ Expected to Cut

US Dollar Forecast: USD/CAD to Face Uptick in US PCE Index

Gold Price Stages Five-Day Rally for First Time Since March

--- Written by David Song, Senior Strategist

Follow on Twitter at @DavidJSong