- The GBP/USD weekly forecast shows escalating fears of a US recession.
- Downbeat US inflation figures increased expectations for Fed rate cuts.
- Data on Friday revealed an unexpected contraction in the UK economy.
The GBP/USD weekly forecast is positive despite the paused rally, as escalating US recession fears weigh on the greenback.
Ups and downs of GBP/USD
The GBP/USD price had a slightly bullish week as the dollar fell due to fears of the US recession. Meanwhile, a downbeat UK GDP report kept a lid on gains.
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This week, Trump imposed a 25% tariff on steel and aluminum imports. This tariff affected the Eurozone and Canada, who responded immediately. The trade wars dimmed the outlook for the global economy and increased US recession fears. Meanwhile, downbeat US inflation figures increased expectations for Fed rate cuts.
On the other hand, the pound fell after data on Friday revealed an unexpected contraction in the UK economy. This put pressure on the BoE to lower borrowing costs.
Next week’s key events for GBP/USD
Next week, the US will release its retail sales report. Meanwhile, the UK will release employment data. Moreover, market participants will focus on the Fed and Bank of England policy meetings.
Market participants expect the Fed to keep interest rates unchanged. However, traders will focus on the messaging during the meeting for clues on future moves. Similarly, investors expect the Bank of England to hold rates on Thursday. The tone at the meeting will also give clues about future policy moves.
GBP/USD weekly technical forecast: Uptrend meets solid resistance zone
On the technical side, the GBP/USD price has reached a solid resistance zone comprising the 1.3000 key psychological level and the 0.618 Fib retracement. The bullish bias is strong, with the price far above the 22-SMA and the RSI near the overbought region.
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Moreover, the price has maintained a bullish trend, making higher highs and lows and keeping above the 22-SMA. Therefore, bulls might be strong enough to break above the current resistance zone. However, the price needs a pause or pullback to the SMA after a sharp swing. If this happens, the price will fall to the 22-SMA before bouncing to retest the resistance zone.
A break above this zone will clear the path for GBP/USD to retest the 1.3401 resistance. However, if the zone holds firm, bears might overpower bulls to push the price below the 22-SMA. This would allow the price to revisit the 1.2604 support level.
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