- GBP/USD has been hovering below 1.3550, with GBP dovish despite better risk appetite.
- The pound appears to have formed a descending triangle in the past few weeks, implying a possible break down towards recent lows below 1.3400.
The GBP/USD has seen choppy, two-way trading conditions on Tuesday, oscillating between session highs at 1.3565 and session lows below 1.3500, as the pair, for the most part, stayed in recent intraday ranges. Despite a decent rebound in global stock markets on signs of easing in Russia-Ukraine tensions and despite higher-than-expected December UK wage growth figures that economists say strengthen the case For BoE adjustment, sterling has been weak. At current levels near 1.3525, GBP/USD is trading sideways on the day.
The pound seems to have formed a descending triangle in the last few weeks and the pair apparently did not have enough conviction to mount a significant breakout to the upside. Therefore, bearish technicians expect GBP/USD to break below support in the 1.3500 area and push lower towards the lows below 1.3400 last month. While the easing of geopolitical tensions may have hit the US dollar in the near term amid weakening safe-haven supply, Tuesday’s producer price inflation numbers came in higher than expected, strengthening the case for Fed hardliners like James Bullard.
Bullard has called for a 100bp adjustment for July 1st, which means he is likely to support a 50bp move in March. Other Fed lawmakers have opposed this idea, saying they would prefer a more dovish policy change. But markets seem to think that aggressive voters will win this debate, with CME’s Fed Watch tool suggesting a roughly 60% chance of a 50bp rise in March versus just 25% a week ago (before the report). consumer price inflation for January).
Looking ahead to the rest of the week, geopolitics will of course continue to be key to watch, but there is also plenty of US/UK data for GBP/USD traders to pay attention to. UK January CPI figures and US January Retail Sales and Minutes from the latest Fed meeting are due out on Wednesday. Thursday and Friday will be packed with speeches from the Fed, while UK retail sales figures for January are due out on Friday.
Additional technical levels
Source: Fx Street
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