GBP/USD recovers to 1.2400 as USD weakness returns, Powell targets
The downward momentum for the GBP/USD currency pair has shown weariness and is now rebounding above 1.2400. As the US Dollar corrects downward along with US Treasury note yields, the Cable is making efforts to rebound. Powell was waiting to speak.
On Thursday, the GBP/USD pair is once again under some selling pressure and falls again into the mid-1.2400s during the first half of the European session, getting even closer to a three-week low hit the day before. The US Dollar (USD) climbs to a nearly two-month high and extends its uptrend for a third straight day, making it the fifth day of a positive move in the previous six. This is considered as putting significant pressure on the major. The US dollar is supported by recent optimism on a likely increase in the US debt ceiling as well as expectations that the Federal Reserve (Fed) will maintain higher interest rates for longer.
On the other side, the British Pound (GBP) is under pressure due to forecasts that the Bank of England (BoE) would not need to raise interest rates as frequently as soon to reduce inflation. The underwhelming UK jobs figures reported on Tuesday and Governor of the Bank of England Andrew Baily’s less hawkish comments served as fuel for the rumors. Bailey stated that the UK’s inflation is predicted to decline significantly over the upcoming months during a speech at the annual British Chamber of Commerce Conference on Wednesday. However, Bailey reaffirmed that the BoE won’t hesitate to raise interest rates to get inflation back to the 2% objective.
The fundamental background outlined above leads one to believe that the GBP/USD pair will encounter the least amount of resistance on the downside. Therefore, any attempt at recovery runs the danger of fizzling out relatively rapidly and could still be perceived as an opportunity by pessimistic traders. Market investors are now focusing on the US economic calendar, which includes the weekly initial claims for unemployment insurance, the Philadelphia Fed Manufacturing Index, and existing home sales data.
GBP/USD TECHNICAL ANALYSIS DAILY CHART:
GBP/USD is trading in the up channel.
GBP/USD is currently trading below 5&20 SMA.
RSI is in buying zone which suggests bullishness and Stochastic is suggesting a downtrend.
GBP/USD resistance is at 1.24426 & its immediate support level is 1.23878
HOW TO TRADE GBP/USD
GBP/USD is now trading in an upward channel, and the price is near a significant resistance level; if this level is broken and the price remains above it, further gains are expected.