GBP/USD Price Forecast: Steadies above 1.3700 near nine-day EMA support

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GBP/USD steadies after registering modest gains in the previous session, trading around 1.3700 during the Asian hours on Wednesday. The technical analysis of the daily chart points to a potential bearish reversal as the range narrows, indicating waning buyer momentum within a rising wedge pattern.

GBP/USD may face initial resistance at 1.3869, its highest level since September 2021.
The 14-day Relative Strength Index holds at 61.75, above mid-line and below overbought territory.
Immediate support is located at the nine-day EMA near 1.3678.

The nine-day Exponential Moving Average (EMA) at 1.3678 rises above the 50-day EMA at 1.3493, with price holding above both. Both averages slope higher, reinforcing trend strength. The momentum indicator 14-day Relative Strength Index (RSI) at 61.75 stays above the 50 mid-line without overbought readings, confirming bullish momentum.

The GBP/USD pair may find primary resistance at 1.3869, the highest since September 2021, reached on January 27, followed by the upper boundary of the rising wedge around 1.4010. A break above the wedge could open a fresh leg higher toward 1.4248, the highest since April 2018.

The immediate support is seen at the nine-day EMA of 1.3678, aligned with the lower rising wedge boundary. A break below the wedge would cause the emergence of a bearish bias and expose the 50-day EMA support at 1.3493, followed by the support reversal zone around 1.3350.

(The technical analysis of this story was written with the help of an AI tool.)

Pound Sterling FAQs

What is the Pound Sterling?

The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).

How do the decisions of the Bank of England impact on the Pound Sterling?

The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.

How does economic data influence the value of the Pound?

Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.

How does the Trade Balance impact the Pound?

Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.

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