14.02.202411:05 Forex Analysis & Reviews: Technical Analysis of GBP/USD for February 14, 2024

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GBP/USD Sharp Reversal Confirms Bearish Dominance

Key Takeaways

GBP/USD impacted by contrasting UK and US inflation data.
Bearish patterns and indicators dominate the short-term outlook.
Monitor monetary policy updates and market sentiment for trading insights.

Market Overview:

The trading day starts unfavorably for the British pound. The UK's lower Consumer Price Index (CPI) data contrasts with the US's higher inflation figures. This dynamic puts downward pressure on the GBP/USD pair. Central banks' monetary policies are pivotal in shaping market sentiment.

Inflation Data Impact

In the UK, the month-over-month inflation rate dropped significantly (-0.6%, against a forecast of -0.3% and a previous rate of 0.4%). The year-over-year data also underperformed. This trend may prompt the Bank of England (BoE) to consider relaxing its monetary policy sooner. Market projections now fully anticipate three 25 basis points rate cuts by the BoE this year.

US Inflation and Rate Cut Expectations

Conversely, higher US inflation data alters Federal Reserve rate cut expectations. The likelihood of a rate reduction in 2024 has decreased, pushing the anticipated timing from June to July, and virtually excluding a cut in May.

Technical Outlook: GBP/USD H4 and H1 Frames

GBP/USD Short-Term Trends

A sharp reversal from 1.2691 characterizes the GBP/USD pair's behavior, following a Bearish Engulfing candlestick pattern in the H4 chart. The pair broke below a short-term trend line, setting a local low at 1.2543. The next bear target is 1.2519. Intraday resistances are at 1.2570 and 1.2600.

Indicator Analysis

The majority of technical indicators (18 out of 23) signal Sell; 18 out of 18 moving averages concur.

Market Sentiment Analysis

Despite a generally bullish sentiment (57% bulls), recent shifts lean bearish (55% bears in the last three days).

Weekly Pivot Points

WR3 - 1.26951

WR2 - 1.26671

WR1 - 1.26519

Weekly Pivot - 1.26391

WS1 - 1.26239

WS2 - 1.26111

WS3 - 1.25831

Key Technical Insights and Scenarios

Bearish Indicators

Bearish Engulfing and Pin Bar patterns suggest downtrend continuation.
The price is below DEMA 50 and EMA 100, indicating bearish momentum.
A broken rising trendline signals a possible bearish trend shift.
RSI at 36.73 points to bearish momentum, with potential for further downside.

Bullish Scenario

A bounce from the key short-term support could initiate a rebound.
An RSI reversal before oversold territory may signal buying pressure resurgence.
Positive GBP news or negative USD news might trigger a bullish reversal.

Bearish Scenario

Persistent prices below DEMA 50 and EMA 100 may maintain the bearish trend.
New bearish candlestick patterns below current support could extend the downtrend.
Negative GBP news or positive USD news might amplify bearish momentum.

Conclusion:

For bullish traders, watching for support holds and sentiment shifts is key. Bearish traders should monitor for further breaks below support and negative GBP news. Both scenarios highlight the importance of staying attuned to monetary policy changes and market sentiment.

Useful Links

Important Notice

The begginers in forex trading need to be very careful when making decisions about entering the market. Before the release of important reports, it is best to stay out of the market to avoid being caught in sharp market fluctuations due to increased volatility. If you decide to trade during the news release, then always place stop orders to minimize losses.

Without placing stop orders, you can very quickly lose your entire deposit, especially if you do not use money management and trade large volumes. For successful trading, you need to have a clear trading plan and stay focues and disciplined. Spontaneous trading decision based on the current market situation is an inherently losing strategy for a scalper or daytrader.

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