If on Monday, the pound remained relatively stable despite the euro's decline, then yesterday it essentially caught up with the single currency. In other words, the pound was declining more actively than the euro. Overall, at this point, the reason for the dollar's broad strength lies in the statements made by European Central Bank officials. On Monday, ECB President Christine Lagarde may have hinted at the possibility of a rate cut, although not imminent. Yesterday, it was Philip Lane's turn, and you can find his speech if you visit the ECB's website. On the third slide of his presentation, you can see a chart of changes in interest rates in combination with forecasts. What's interesting is that, according to forecasts, the ECB may raise the rate once again in the second quarter of 2024. There's nothing new about this. However, what's notable is that, apparently, the first rate cut will happen in the second quarter of 2024. And over the next two years, the rate could be lowered by a whopping 150 basis points. So there's nothing surprising about the euro's decline, and along with it, the pound.
Nevertheless, the dollar is excessively overbought, and the market clearly needs at least a correction. It is quite possible that today's report on U.S. durable goods orders will be the trigger for it. Especially since the market expects it to decrease by -1.4%. This would mark the second consecutive decline in orders. Consequently, consumer activity is declining fairly quickly. And this activity particularly drives the economy.
The GBP/USD pair continues to ignore technical signals on the pound's oversold conditions. As a result, the quote has fallen below the 1.2150 level, indicating a high level of speculative short positions.
On the four-hour chart, the RSI shows a reading at an extremely low level of 19.17. The last time this oversold level was observed was during the autumn collapse of 2022.
On the same time frame, the Alligator's MAs are pointing downward, in line with the main cycle's direction.
Outlook:
If the current movement persists and traders continue to ignore the pound's oversold conditions, it is possible for the pound to fall to the area of 1.1950/1.2050.
Complex indicator analysis indicates a downward cycle in the short-, mid- and long-term timeframes.
