GBP/USD falls despite Better than Expected GfK Consumer Confidence
- In the UK, consumer confidence rose to its highest level in two years.
- GBP gained since the actual GfK Consumer Confidence data was higher than anticipated.
- The dollar remains strong ahead of the Core PCE Price Index.
GBP/USD Fundamental Analysis
GBP/USD is trading at $1.2031, up by 0.15 in 24 hours. The US personal consumption expenditure (PCE) data will be released today. Therefore, the British pound is testing critical support against the US dollar.
GfK Consumer Confidence
The GfK’s consumer confidence indicator rose to -38, seven points higher than the previous -45. It represents the quickest pace of increase since March 2021.
Household confidence in the UK increased as it became clear that the worst inflationary period was starting to ease. However, it implies that spending will probably continue, which might worry the Bank of England (BoE) as it weighs how much to raise interest rates in its fight against inflation.
Confidence in consumers slightly exceeded expectations, which helped the Pound (GBP). However, BoE policymaker Silvana Tenreyro’s speech on February 24 is expected to be the primary factor influencing the movement for the GBP at the end of the week.
Upcoming US PCE Index
On the dollar side, the US PCE Price Index is expected to be released today, and the US Dollar Index (DXY) is waiting for it to make a move. The DXY rose by 0.07% to 104.67 at the time of writing.
Investors must be prepared for a surprise from the Federal Reserve’s (Fed) preferred inflation tool because data on the labour market and January’s retail sales have already proven that the US inflation is high and raising the rates further for a prolonged period will control it.
Ahead of the Federal Reserve’s preferred inflation measure, the US dollar remained in demand due to bullish market sentiments.
GBP/USD Technical Analysis
The H1 Chart of the GBP/USD currency pair shows signs of possible strength in the bearish trend ahead. The price has already broken below the initial support level of 1.19870. The 20-Day Simple Moving Average line has also cut all the other SMAs from above, confirming heavy selling pressure. Price is moving in a descending channel and has reached the bottom of the lower band of the channel.
The technical indicators are also suggesting possible continuation of the trend. The Relative Strength Index (RSI) is also close to the oversold zone of 30. Furthermore, the Stochastic Oscillator is also near 20 (oversold zone).
The next few hours might push the prices further to the downside towards the second support at the 1.19345 level. It is the same level where 100-Day SMA and 200-Day SMA lines are crossing in the daily price chart. The idea is to remain short and put Take Profit for the 1.19345 level. However, the upcoming release of the US PCE Index will also interrupt during the early American Trading Hours.
GBP/USD Daily Technical Levels:
| Support | Resistance |
| 1.1980 | 1.2064 |
| 1.1944 | 1.2112 |
| 1.1897 | 1.2147 |
Pivot Point: 1.2028
