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GBP/USD bounces from the daily low, but has no continuity; remains below the 50-day SMA

  • GBP/USD reverses an intraday decline amid a modest USD pullback from more than two-month highs.
  • The disappointing release of the Chicago PMI prompts some profit taking around the USD.
  • Bets on more Fed rate hikes and risk aversion momentum should act as a tailwind for the dollar.

The pair GBP/USD attracts some dip buying near the 1.2350-1.2345 zone on Wednesday and rises to the upper end of its daily trading range during early American session. The pair is currently sitting around 1.2400, below the 50-day SMA barrier tested the day before.

The US dollar (USD) pared some of its intraday gains to the highest level since mid-March, in reaction to the disappointing release of the Chicago PMI, which fell to 40.4 in May from 48.6 previously. Elsewhere, the British pound continues to receive some support from the possibility of further interest rate hikes by the Bank of England (BoE), bolstered by higher-than-expected consumer inflation figures released last week. This, in turn, lends some support to GBP/USD, although the lack of follow-through buying warrants caution before positioning for an extension of the recent bounce from the 1.2300 area, or a 2-month low set last Thursday. .

Investors now seem convinced that the Federal Reserve (Fed) will keep interest rates higher for longer and have been betting on another 25 basis point hike at the next FOMC policy meeting in June. These bets were confirmed by the US consumer staples price index released on Friday, which indicated that inflation is holding steady. Apart from this, the risk aversion momentum supports the prospects for further appreciation in the short term of the safe-haven dollar and could help limit any significant rise in the GBP/USD pair. Global risk sentiment is weighed down by weak Chinese PMI data, compounding concerns of a global economic downturn and benefiting safe-haven assets.

The aforementioned fundamental background warrants some caution on the part of aggressive bullish traders ahead of major US macroeconomic releases scheduled for early in the month, including the Non-Farm Payrolls (NFP) release on Friday. In the meantime, broader equity market weakness could continue to act as a tailwind for the dollar and keep any significant rise in GBP/USD capped, at least for now.

technical levels

GBP/USD

Overview
Last price today 1.2397
Today Daily Variation -0.0017
today’s daily variation -0.14
today’s daily opening 1.2414
Trends
daily SMA20 1,248
daily SMA50 1.2441
daily SMA100 1.2292
daily SMA200 1.1984
levels
previous daily high 1.2447
previous daily low 1.2327
Previous Weekly High 1.2472
previous weekly low 1.2308
Previous Monthly High 1.2584
Previous monthly minimum 1.2275
Fibonacci daily 38.2 1.2401
Fibonacci 61.8% daily 1.2373
Daily Pivot Point S1 1.2345
Daily Pivot Point S2 1.2276
Daily Pivot Point S3 1.2226
Daily Pivot Point R1 1.2465
Daily Pivot Point R2 1.2516
Daily Pivot Point R3 1.2585

Source: Fx Street

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