GBP/USD Technical Analysis: Technical Indicators Bearish
Amid cautious attempts, the price of the GBP/USD currency pair attempted to rebound higher. Its gains did not exceed the 1.3070 level, which is stable around it at the time of writing the analysis. Investors recently weighed the future of each bank’s policy tightening and so far are in favor of a stronger US dollar. The price losses of the GBP/USD currency pair this week reached the support level 1.2980, near its lowest during the year 2022 trading.
Commenting on the GBP/USD future, Western Union Business Solutions says that the GBP/USD exchange rate may be about to make a decisive break below 1.30 this week. The call comes at a time when the exchange rate flirts with this psychologically important level with the British pound under pressure in the face of the continued appreciation of the dollar.
So says analyst George Fissey at Western Union Business Solutions, “The GBP/USD exchange rate has broken below the $1.30 handle several times over the past week, but while still providing decent support, a deeper slide looks imminent. Based on current market dynamics and renewed demand for the dollar as a safe haven.” The analyst adds, “Although sterling is supported by higher yields in the UK thanks to the Bank of England raising interest rates, it remains weak against the safe haven, and higher yields.”
The dollar was bought in early trading this week after St. Louis Fed President James Bullard said the US central bank needs to move quickly to raise US interest rates to about 3.5% this year and that it should not rule out rate increases of 75 basis point. A 75bp hike would be a dramatic signal of the Fed’s intent to stand on top of rising inflation which markets weren’t expecting until Pollard’s comments introduced the idea.
The last time the Fed raised rates was by 75 basis points in November of 1994. Investors are now seeing about 215 basis points in rate hikes from the Fed by the end of the year, more than any other central bank in the developed market. More importantly, the total amount of rate hikes expected from the Fed in the current stroll cycle has been up recently, which usually supports the currency.
“The US economy is much healthier and will weather the impact of the energy shock much better, allowing the Federal Reserve to put pressure on the brakes to tackle inflation,” says Marius Hadjikiriakos, senior investment analyst at XM.com. Taylor Broome, a Paris-based forex trader at JPMorgan, says he will be watching data releases this week to spur another downward movement in the pound against the dollar.
The JP Morgan trader is looking to sell off the ‘intraday’ rallies in GBP/USD towards 1.3080.
According to the technical analysis of the pair: The price of the GBP/USD currency pair is still approaching the 1.3000 psychological support level that supports the continuation of the bearish trend. It warns of a stronger bearish move, and on the daily chart, the support will be 1.2845, the next most important target. The resistance level 1.3335 will be important for the bulls to dominate and get out of the current sharp bearish channel. Technical indicators are still more bearish so far. Sterling dollar gains will remain subject to sale unless the Bank of England gives a tougher expression of its policy future along the same path as the US Federal Reserve.