Pound Falls as Traders Dismiss Dovish Fed Expectations
Pound Sterling falls against the US Dollar as traders scale back expectations of a dovish Fed stance
FUNDAMENTAL OVERVIEW:
The Pound Sterling (GBP) slipped toward the 1.3200 mark against the US Dollar (USD) during Thursday’s European session, marking its sixth consecutive daily loss. The GBP/USD pair remains under pressure as the US Dollar strengthens, with the US Dollar Index (DXY) holding near a fresh two-month high around 100.00 reached on Wednesday.
The Greenback’s strength is supported by stronger-than-expected US GDP and employment data, along with Fed Chair Jerome Powell’s endorsement of maintaining current interest rates. This has led traders to reduce expectations for a September rate cut.
According to the CME FedWatch Tool, the likelihood of a Fed rate cut in September has dropped to 43.2%, down from 63.3% earlier in the week.
Data from the U.S. Bureau of Economic Analysis (BEA) showed that the economy expanded by 3% annually, well above the projected 2.4%, after contracting 0.5% in Q1. Additionally, ADP reported 104K new private-sector jobs in July, surpassing expectations of 78K, following a loss of 23K jobs in June.
GBP/USD TECHNICAL ANALYSIS CHART:
Technical Overview:
GBP/USD is trading within a down channel.
GBP/USD is moving below all the Moving Averages (SMA).
The Relative Strength Index (RSI) is in Selling Zone, while the Stochastic oscillator suggests Negative trend.
Immediate Resistance level: 1.3311
Immediate support level: 1.3160
HOW TO TRADE GBP/USD
The GBP/USD experienced a sharp upward move but faced strong rejection, resulting in a swift decline. The pair has now broken below a key support level and continues to trade beneath it, signalling bearish control. With a bearish engulfing pattern forming, a sustained move below this level could open the door for further downside.