GBP/USD-EUR/GBP-GBP/JPY Setups – Analyzing the British Pound’s Outlook Ahead of UK GDP Data Release for Key Insights.
- The still-hot wage growth in the UK has yet to reflect in a higher GBP/USD exchange rate.
- EUR/GBP maintains its position above crucial support levels, leaving bearish investors frustrated.
- GBP/JPY remains firmly guided by an ascending channel.
What lies ahead in terms of outlook and critical levels to monitor for select GBP currency pairs?
GBP/USD-EUR/GBP-GBP/JPY Setups Ahead of UK GDP for GBP
The British pound is currently testing vital support levels against the US dollar in anticipation of the upcoming UK GDP data, scheduled for release later today. Over recent weeks, the pound has displayed weaker performance compared to some of its peers, with no apparent signs of a reversal in sight.
Even the mixed UK jobs data released on Tuesday failed to alter this prevailing soft bias. The robust wage growth strongly suggests a 25-basis points interest rate hike by the Bank of England (BoE) during its meeting on September 22. BoE Governor Andrew Bailey mentioned last week that interest rates could rise further due to persistent price pressures, but the central bank is approaching the end of its tightening cycle. The primary focus now shifts to the expected UK GDP figure for July, which is projected to be 0.4% on a year-on-year basis, a decrease from June’s 0.9%. However, the three-month average has risen slightly to 0.3% in July from the previous 0.2%.
GBP/USD: Testing Crucial Support
From a technical perspective, the failure to breach immediate resistance at 1.2820 this month has kept the downward bias for GBP/USD intact. Moreover, GBP/USD has been unable to maintain a position above critical converged support levels, including the 89-day moving average, the lower boundary of the Ichimoku cloud, and the end-June low of 1.2600. Historically, the pair has rebounded from similar support levels on two occasions since the end of 2022.
Currently, the pair is testing a crucial buffer at the 200-day moving average. The last time it decisively fell below this average was in 2022. A successful hold above this level is essential to maintain a constructive broader bias. From a medium-term standpoint, the rise in July to a multi-month high has confirmed a pattern of higher highs and higher lows since late 2022, suggesting the potential for medium-term gains.
Significantly, as noted late last year, a higher high this year compared to 2022 could signify more than just a corrective rebound and may open the door to a reversal of the medium-term downtrend in GBP/USD.
However, the evidence for a long-term uptrend remains inconclusive. GBP/USD still trades below major resistance levels, including the 89-month moving average and the Ichimoku cloud. Additionally, it aligns with a downtrend line from 2014, indicating that the long-term downtrend has not yet reversed.
EUR/GBP: Holding Steady Above Q2-2023 Support Line
EUR/GBP continues to maintain its position above a converging floor formed by a horizontal trendline from June and another horizontal trendline since late 2022, which lies in the range of 0.8550-0.8600. However, unless the cross manages to surpass resistance at the mid-July high of 0.8700, the path of least resistance appears to be sideways to downward.
GBP/JPY: Consolidation within the Uptrend
GBP/JPY has remained well-guided by an ascending Pitchfork channel since early 2023. Nevertheless, the cross has recently struggled to sustain levels above the previous resistance, which has now become support, at the July high of 184.00. A definitive break below this level would indicate a waning immediate upward pressure but wouldn’t necessarily imply a reversal of the broader uptrend. Only a breach below the July low of 176.25 would disrupt the broader uptrend.