Downside Bias Suggesting Early Downtrend for GBP/USD on the Dail
Following this morning’s jobs data out of the UK, which saw unemployment remain steady at 4.2% in the three months to November and wages for November (3m YoY) fall to 6.8% (including bonuses) and, as expected at 6.6% for pay excluding bonuses, sterling has sold off against its US counterpart during the European session.
Technical Eyes
Technically, the longer-term action shows that we are in the process of forming a positive divergence out of the Relative Strength Index (RSI) on the 3-month chart—yes, that is a candle fashioned for every three months of trading. Should the RSI venture above the 50.00 centreline, this would indicate positive momentum (average gains exceeding average losses). So, while the trend is evidently lower on the 3-month chart (since October 2007), downside momentum is slowing and could be brewing for a longer-term reversal to the upside.
The monthly scale reveals that buyers and sellers are battling for position at the underside of a resistance level from $1.2715. This follows a two-month bullish phase; if the currency pair overthrows the noted resistance base this month, continuation buying toward another layer of resistance at $1.3111 is not out of the question, while any rejection at resistance unearths support at $1.2173.
Finally, moving across the page to the daily timeframe, upside momentum has evidently slowed, visible not only through price action but also confirmed through the RSI demonstrating negative divergence and now on the nib of reclaiming the 50.00 centreline to the downside. Trend studies show a series of higher highs and higher lows unfolded since bottoming in October 2023 (uptrend), but should sellers continue to tunnel lower, an early downtrend could form today if a lower low is shaped beyond the $1.2607 2 January low.
Direction for the GBP/USD?
While the longer-term 3-month chart echoes a possible reversal to the upside through positive divergence, the monthly timeframe shaking hands with resistance at $1.2715 and the daily timeframe showing upside momentum slowing along with the possibility of an early downtrend forming, this could be a market sellers are drawn to over the coming week.
Tomorrow’s UK CPI inflation will help determine direction. Softer data may see investors increase rate-cut bets and further weigh on the pound. As of writing, OIS swaps show 133bps of cuts priced in for the year, with the first 25bp cut nearly fully priced in for May’s policy meeting.
Technical Eyes
Technically, the longer-term action shows that we are in the process of forming a positive divergence out of the Relative Strength Index (RSI) on the 3-month chart—yes, that is a candle fashioned for every three months of trading. Should the RSI venture above the 50.00 centreline, this would indicate positive momentum (average gains exceeding average losses). So, while the trend is evidently lower on the 3-month chart (since October 2007), downside momentum is slowing and could be brewing for a longer-term reversal to the upside.
The monthly scale reveals that buyers and sellers are battling for position at the underside of a resistance level from $1.2715. This follows a two-month bullish phase; if the currency pair overthrows the noted resistance base this month, continuation buying toward another layer of resistance at $1.3111 is not out of the question, while any rejection at resistance unearths support at $1.2173.
Finally, moving across the page to the daily timeframe, upside momentum has evidently slowed, visible not only through price action but also confirmed through the RSI demonstrating negative divergence and now on the nib of reclaiming the 50.00 centreline to the downside. Trend studies show a series of higher highs and higher lows unfolded since bottoming in October 2023 (uptrend), but should sellers continue to tunnel lower, an early downtrend could form today if a lower low is shaped beyond the $1.2607 2 January low.
Direction for the GBP/USD?
While the longer-term 3-month chart echoes a possible reversal to the upside through positive divergence, the monthly timeframe shaking hands with resistance at $1.2715 and the daily timeframe showing upside momentum slowing along with the possibility of an early downtrend forming, this could be a market sellers are drawn to over the coming week.
Tomorrow’s UK CPI inflation will help determine direction. Softer data may see investors increase rate-cut bets and further weigh on the pound. As of writing, OIS swaps show 133bps of cuts priced in for the year, with the first 25bp cut nearly fully priced in for May’s policy meeting.
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