GBP/USD falls to 1.2300 amid modest dollar recovery from multi-month low

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  • GBP/USD enters negative territory for the second day in a row on Tuesday.
  • The dollar attracts safe haven flows in the face of recession risks and exerts pressure.
  • Expectations that the Bank of England will continue to raise rates should limit deeper losses.

The pair GBP/USD It attracts some sellers after an early rally to the 1.2415 zone and turns lower for the second day in a row on Tuesday. The pair retreats further from the highest level since June 2022 hit on Monday and falls towards the round 1.2300 level, or a four-day low during the first half of the European session.

The US dollar recovers slightly from its nine-month low and turns out to be a key factor putting some downward pressure on GBP/USD. Market sentiment remains fragile amid concerns about economic headwinds stemming from the worst COVID-19 outbreak in China. In addition, the protracted war between Russia and Ukraine has fueled recession fears. This, in turn, dampens investor appetite for riskier assets and drives some safe-haven flows into traditionally safe assets, including the dollar.

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The pound sterling, for its part, is being pressured by the weakness of the PMI indices, which showed a contraction of business activity in January, both in the manufacturing and services sectors. However, speculation that high consumer inflation will keep pressure on the Bank of England (BoE) to further raise interest rates could lend sterling some support. Aside from this, increased bets on a 25 basis point Fed rate hike in February could cap the USD and help limit deeper losses for GBP/USD.

Therefore, it will be prudent to wait for strong selling before confirming that spot prices have peaked in the near term and positioning for any significant corrective decline. Preliminary data from the PMI and the Richmond manufacturing index will be published in the US economic calendar. This, along with US bond yields and broader risk sentiment, will influence USD price dynamics and create short-term trading opportunities around GBP/USD.

Technical levels to watch

GBP/USD

Overview
Last price today 1.2308
Today Daily Variation -0.0065
today’s daily change -0.53
today’s daily opening 1.2373
Trends
daily SMA20 1.2159
daily SMA50 1.2123
daily SMA100 1.1732
daily SMA200 1.1975
levels
previous daily high 1.2448
previous daily low 1.2324
Previous Weekly High 1.2436
previous weekly low 1.2169
Previous Monthly High 1.2447
Previous monthly minimum 1.1992
Fibonacci daily 38.2 1.2371
Fibonacci 61.8% daily 1.2401
Daily Pivot Point S1 1.2315
Daily Pivot Point S2 1.2257
Daily Pivot Point S3 1.2191
Daily Pivot Point R1 1,244
Daily Pivot Point R2 1.2506
Daily Pivot Point R3 1.2564
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Source: Fx Street

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