GBP/USD plummets 1%, worst weekly drop in 2024
Quick look
- GBP/USD fell almost 1%, marking its most significant weekly loss in 2024.
- A tight trading range is seen as the pair fluctuates slightly below 1.2750.
- Key economic indicators to watch: inflation figures, PMI, Bank of England decision and British retail sales.
The GBP/USD pair recently saw a notable drop of almost 1%, concluding the week with its most substantial loss of the year. As traders and analysts watch the currency pair with bated breath, the start of the new week sees GBP/USD wandering in a tight range slightly below the 1.2750 mark.
Roller Coaster Ride: Analysis of GBP/USD's Recent Performance
The currency pair's ride last week was nothing short of a rollercoaster. Firstly, it reached a resistance high of 1.2893 on Friday, March 8. Subsequently, the rise of the GBP/USD exchange rate to this point was met with a pullback. This was because the RSI reached the overbought threshold of 70. Influenced by unexpectedly strong inflation data in the US, this pullback caused the pair to fall below 1.1750. Despite this setback, the currency duo's positions above the 50-day, 100-day, and 200-day moving averages indicate that it was just a setback in an otherwise intact uptrend.
Technical analysis
Furthermore, technical analysis further supports this view. For example, a drop below the 50-day moving average (DMA) at 1.2686 could indicate a significant trend change. Furthermore, a fall below the 200-day moving average at 1.2589 would indicate a bearish phase for GBP/USD. Finally, the economic releases of the upcoming week are critical. These include inflation figures, the Purchasing Managers' Index (PMI), the Bank of England's rate decision and British retail sales. Together, they are set to be the main drivers of the destiny of the pound.
Next week: economic events to watch
This week, the focus is on several key economic indicators. February's consumer price index (CPI) inflation rate is forecast to fall to 3.6% from 4.0% in January, and is expected to rise 0.6% monthly, a rebound from the fall of the previous month. These figures serve as a barometer of the health of the economy and as crucial factors influencing the direction of GBP/USD. The pair's downward correction path depends on this upcoming data, with significant support levels at 1.2675 and 1.2600 under scrutiny by the bears.
On the contrary, the pair's rise depends on breaking the psychological barrier of 1.3000, which requires stability above the resistance of 1.2830. The economic events unfolding this week are critical in guiding the direction of GBP/USD, and market participants are bracing for performance limited to narrow ranges, awaiting reactions to the revealed indicators.
As GBP/USD navigates the flow of market sentiment and economic indicators, the technical picture offers a map of possible directions. The current pullback within a broader uptrend underlines the resilience of the pound-dollar exchange rate. However, impending economic events cast a shadow of uncertainty, making anticipation of the pair's next moves a complex puzzle.
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