GBP/USD drifts lower towards 1.2000 in a cautious tone – Capital Street FX
06 Mar 2023
GBP/USD is struggling to gain traction and trading in negative territory at around 1.2000 on Monday. The cautious market stance at the beginning of the week seems to be helping the US Dollar hold its ground and weighing on the pair.
Following Friday’s decisive rebound, GBP/USD has started the new week in a relatively indecisive manner. The pair was last seen fluctuating in a narrow channel above 1.2000 and the short-term technical outlook suggests that the consolidation is likely to continue.
On Friday, the ISM Services PMI survey from the US revealed that the business activity continued to expand at a robust pace in February and the input inflation remained high in the service sector. Although this data helped the US Dollar find some demand in the American session, the upbeat market mood didn’t allow the currency to preserve its strength.
In its Semi-annual Monetary Policy Report published on Friday, the US Federal Reserve reiterated that ongoing increases in the policy rate will be necessary. FOMC Chairman Jerome Powell will present this report and respond to questions before the Senate Banking Committee and the House Financial Services Committee on Tuesday and Wednesday, respectively.
Ahead of Powell’s testimony, market participants are likely to remain on the sidelines, allowing risk perception to drive the pair’s action.
GBP/USD TECHNICAL ANALYSIS DAILY CHART:
GBP/USD is currently trading in a down channel.
GBP/USD is currently trading below all SMA.
RSI is in buying zone which suggests bullishness and Stochastic is suggesting no trend.
GBP/USD’s immediate resistance is at 1.20454 & its immediate support level is 1.19966
The Fibonacci 23.6% retracement of the most recent downturn and the four-hour chart’s 100-period Simple Moving Average (SMA) are in line with where the GBP/USD currency pair is trading, which is close to 1.2050. The declining trend line that is located above the lower highs that appear to have developed on the four-hour chart forms significant resistance slightly above that level at 1.2080. The only big bullish development that would allow for a protracted comeback to the Fibonacci 38.2% retracement level at 1.2120 would be a four-hour closure above that level.
Prior to 1.1970 (static level) and 1.1930 (psychological level, static level, 100-day SMA), 1.2000 (downside) serves as important support (endpoint of the latest downtrend, static level).
HOW TO TRADE GBP/USD
GBP/USD is trading in a down channel; it took rejection from the trend line and followed the downside, and now we can see more downside till an important support level.