GBP/USD Vulnerable amid Failure to Close Above 50-Day SMA

US Dollar Outlook: GBP/USD

GBP/USD holds below the January high (1.2576) following the failed attempt to close above the 50-Day SMA (1.2497), and the exchange rate may give back the rebound from the monthly low (1.2249) as it struggles to retrace the decline following the Bank of England (BoE) rate-cut.

GBP/USD Vulnerable amid Failure to Close Above 50-Day SMA

GBP/USD seems to be unfazed by the weaker-than-expected US Non-Farm Payrolls (NFP) report as it trades within yesterday’s range, and it remains to be seen if the update will sway the Federal Reserve as the economy adds 143K jobs in January versus forecasts for a 170K print.

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Recent remarks from Fed Vice-Chair Philip Jefferson suggest the central bank will retain the current course for monetary policy as ‘I continue to see a gradual reduction in the level of monetary policy restraint placed on the economy as we move toward a more neutral stance as the most likely outcome,’ with the official going onto say that ‘in considering additional adjustments to the federal funds rate, I will carefully assess incoming data, the evolving outlook, and the balance of risks’ while speaking at Lafayette College.

US Economic Calendar

In turn, the semi-annual testimony from Chairman Jerome Powell may influence foreign exchange markets amid the change in US trade policy, and more of the same from Fed officials may produce headwinds for the Greenback as it fuels speculation for lower US interest rates in 2025.

With that said, GBP/USD may stage further attempts to test the January high (1.2576) should Chairman Powell retain a dovish forward guidance for monetary policy, but the exchange rate may continue to track the negative slope in the 50-Day SMA (1.2497) amid the failed attempt to close above the moving average.

GBP/USD Price Chart –Daily

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

• GBP/USD snaps the series of higher highs and lows from the start of the week as it pulls back ahead of the January high (1.2576), with a break/close below the 1.2390 (38.2% Fibonacci extension) to 1.2446 (May low) zone bringing the 1.2300 (50% Fibonacci retracement) to 1.2310 (61.8% Fibonacci extension) region on the radar.
• A breach below the monthly low (1.2249) raises the scope for a move towards the January low (1.2100), but GBP/USD may continue to gut check the negative slope in the 50-Day SMA (1.2497) should it struggle to close below the 1.2390 (38.2% Fibonacci extension) to 1.2446 (May low) zone.
• A push above the January high (1.2576) opens up the 1.2710 (23.6% Fibonacci extension) to 1.2760 (61.8% Fibonacci retracement) region, with the next area of interest coming in around 1.2820 (38.2% Fibonacci extension).

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--- Written by David Song, Senior Strategist

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