GBP/USD Analysis

• 03 January, 2024 Ruchit Thakur

GBP/USD Analysis

Evening Update: Will there be further decline in the GBP/USD pair as it retraced from 1.2800 at the 200 DMA?

On the weekly chart, the GBP/USD pair is currently trading below the 200 DMA after hitting significant resistance from the 1.2800–1.2850 region. Given that GBP/USD is 12% weighted in DXY, the significant increase in the Dollar Index was the main cause of the decline in GBP/USD. The Dollar Index was trading within a solid support zone of 100.50–100.80, as we covered in our earlier report.

• After a strong rejection, the GBP/USD fell below the 200 DMA.
• The GBP/USD pair was strongly rejected by the trendline and the 200 DMA, as shown in the chart. As a result, it may possibly move into the 1.2400 and 1.2100 zones, respectively.
• We may expect a further decrease in the price of GBP/USD because the weekly chart's 200 DMA resides around 1.2850, the point where the 200 DMA converges with trendline resistance.

Please refer to the chart mentioned above, which indicates the GBP/USD resistance as well as how it navigates the weekly 200 DMA. Since the GBP/USD dropped and is currently trading close to the 1.2600 zone, the 1.2800–1.2850 zone serves as resistance to the trendline. Regarding DXY, we noted in our analysis that the Dollar Index was expected to rise from its range of 100.50 to 100.80, which is a strong support zone. When the Dollar Index rises, GBP/USD declines, and vice versa, because the two are inversely proportional. Hence, the increase in DXY was mostly responsible for the loss in GBP/USD.

Potential areas of further fall for the GBP/USD pair include the 1.2400 and 1.2100 zones. DXY may increase to the 1.0350 and 1.0400 zones, respectively, as the GBP/USD is inversely proportional to the Dollar Index, as previously mentioned.

Please check the support and resistance level of GBP/USD on the weekly chart. All levels are in spot chart :