FX.co ★ Technical Analysis of GBP/USD for February 22, 2024

Sterling's Struggle for Dominance: GBP/USD Clashes with Hawkish Fed Echoes

In the forex theater, GBP/USD has recently taken center stage, showcasing a remarkable play of resilience in the face of a hawkish Federal Reserve. Despite the Fed's concerns over inflation and the possibility of a policy stalemate, the pair has demonstrated a swift recovery, gaining 0.10% after an initial dip.

Key Takeaways:

• GBP/USD shows conflicting signals with a recent recovery despite a hawkish Federal Reserve.
• Mixed indicator signals on H1 timeframe point to a market at a crossroads.
• The sentiment scoreboard reflects a cautious shift from bullish to bearish in the short term.

Fundamental Analysis:

The Federal Reserve's latest minutes suggest a predominantly hawkish outlook, heightening the risk of a too-rapid decrease in interest rates. The policymakers are wary of inflation progress hitting a dead-end, indicating ongoing debates about the pace of balance sheet reduction. This hawkish tone initially sent the EUR/USD pair—and by extension, the GBP/USD—into a negative reaction. However, the GBP/USD pair's quick rebound highlights the market's complex sentiment dynamics.

Technical Analysis:

The H4 chart presents a battleground of technical signals. A shooting star pattern—an ominous sign for bulls—has formed, suggesting potential exhaustion in the uptrend. However, the pair finds itself above both the EMA 100 and DEMA 50, which could provide dynamic support. The RSI, comfortably above the median but below the overbought threshold, corroborates a cautiously optimistic outlook.

Indicator Signals:

The intraday indicator signals are in disarray:

• Technical indicators are almost evenly split, with 9 signaling 'Sell,' 7 'Buy,' and 6 remaining neutral.
• Moving averages are similarly conflicted, each faction having an equal share of 9 indicators.

Sentiment Scoreboard:

The sentiment has seen a subtle but noteworthy shift. While still leaning bullish over the last week, the past three days have seen a bearish pivot, albeit by a narrow margin.

Weekly Pivot Points:

GBP/USD hovers around the Weekly Pivot (1.26391). The pivot points serve as a short-term barometer for potential price movement:

• Above the pivot, WR1 (1.26519) is a modest resistance, with subsequent levels (WR2 - 1.26671, WR3 - 1.26951) poised as upside targets.
• Below the pivot, support comes into play with WS1 (1.26239) and deeper levels (WS2 - 1.26111, WS3 - 1.25831) marking bearish territories.

Conclusion:

GBP/USD faces a crucial test as it navigates between bullish support and bearish pressure. Traders should brace for volatility, with close attention to the pivot points that may dictate the pair's near-term trajectory.

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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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