FX.co ★ Technical Analysis of GBP/USD for December 11, 2023

Key Highlights:

• Lowest inflation projection in two years: 3.3% reflects optimism among British households.
• Resilience post-Ukraine conflict: Despite global tensions, households exhibit robust economic sentiment.
• Decline in interest rate expectations: Only 44% anticipate an increase, marking the largest decline since post-Brexit in 2016.

The economic landscape in the United Kingdom is witnessing a notable shift, as revealed by the Bank of England's latest quarterly survey. This comprehensive analysis offers insights into the sentiments of British households, projecting a positive outlook with significant implications for inflation rates and interest rate expectations.

Positive Projections: According to the survey, British households are foreseeing the lowest inflation rate in two years, with a projection of 3.3%. This optimistic outlook comes in the wake of various economic factors, particularly the aftermath of the Ukraine conflict. The resilience of households in projecting a lower inflation rate suggests a degree of economic stabilization and recovery.

Post-Ukraine Conflict Influence: The positive sentiment appears to be rooted in the aftermath of the Ukraine conflict, a period marked by increased global tensions and economic uncertainties. Despite these challenges, British consumers are expressing confidence in a more stable economic environment. This resilience reflects the adaptability and forward-looking mindset of the populace.

Decline in Interest Rate Expectations: One of the significant indicators of this optimism is the decline in the expectation of interest rate hikes. Only 44% of survey respondents anticipate an increase in interest rates. This marks a substantial decline and is notably the most significant since the aftermath of the Brexit referendum in 2016. The reduced anticipation of interest rate hikes signals a shift in economic expectations and a desire for stability.

Brexit Referendum Parallels: The comparison to the post-Brexit referendum period underscores the magnitude of the current shift in sentiment. The 2016 decline in expectations was a pivotal moment in British economic history, and the current decline post-Ukraine conflict echoes similar sentiments of uncertainty giving way to cautious optimism.

Implications for Economic Policy: The survey results have far-reaching implications for economic policy and decision-makers. The reduced anticipation of interest rate hikes suggests that consumers are advocating for policies that prioritize economic stability. Policymakers may need to consider these shifting sentiments when crafting strategies to navigate the economic recovery.

Conclusion: As British households project a positive outlook with the lowest inflation rate in two years, the economic landscape undergoes a transformation. The echoes of resilience in the aftermath of the Ukraine conflict and the decline in interest rate expectations highlight a populace adapting to challenges and embracing a more optimistic economic future.

Technical Market Overview: GBP/USD

Price Action:

• GBP/USD saw a Pin Bar-driven local low at 1.2501, rebounding strongly to the 1.2601 resistance.
• Bulls broke key levels at 1.2547 and 1.2570, now acting as intraday support, targeting the 50-day Moving Average (MA) at 1.2597.
• Momentum rebounded from H4 oversold conditions, indicating a short-term bullish outlook.
• Further upward movement hinges on breaking above 1.2602 and 1.2613 levels.

Weekly Pivot Points:

• WR3: 1.2905
• WR2: 1.2815
• WR1: 1.2682
• Weekly Pivot: 1.2592
• WS1: 1.2459
• WS2: 1.2369
• WS3: 1.2236

Trading Outlook:

• Bullish Engulfing on the weekly chart post-breakout at 1.2340 signals bullish dominance.
• Trading above the 50-week Moving Average (WMA) aims for the 100 WMA at 1.2504.
• Sustained breakout below 1.1802 critical support may signal substantial downward movement.

Intraday Indicators:

• 16 out of 21 technical indicators: Buy signal.
• Moving averages: 14 Buy signals, 4 Sell signals out of 18.

Sentiment Scoreboard:

• General sentiment: Bulls 58%, Bears 42%.
• Last week: Bulls 53%, Bears 47% (remains bullish).
• Last three days: Bulls 49%, Bears 51% (shift to bearish sentiment).

Useful Links

• More Artcles
• InstaForex Course for Beginners
• Open Trading Account

Important Reminder

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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