- GBP/USD rose for the third day in a row and hit a one-week high.
- Retracement of bets on a more aggressive rate hike by the Federal Reserve continued to weigh on the USD.
- Gloomy expectations from the Bank of England overshadowed mixed UK employment data and continued to act as support.
The pair GBP/USD it gained traction for the third day in a row on Tuesday and soared to a one-and-a-half week high around the 1.2040 region during the middle of the European session. The momentum helped the pair take advantage of the recent recovery from the 1.1750 zone, or the lowest level since March 2020, and was helped by the general weakness of the US dollar.
Investors continue to reduce their bet on a 100 basis point Fed rate hike later this month. Aside from this, risk-on momentum dragged the safe-haven dollar to its lowest level since July 6. Sterling bulls, meanwhile, did not appear to be affected by the UK jobs report, which was mixed, and instead took a boost from expectations of further policy tightening from the Bank of England.
Technically, Tuesday’s positive move validated the overnight breakout of a several weeks old downtrend channel resistance. However, the ensuing strength failed to break above the 100-period SMA on the 4-hour chart and stalled near the 50% Fibonacci level of the 1.2332-1.1760 drop.
The latter is pegged near the 1.2040-1.2045 region and should act as a pivot point, which if broken decisively would set the stage for a further near-term appreciation move. The GBP/USD pair could then attempt to reclaim the 1.2100 mark, which coincides with the 61.8% Fibonacci level, before eventually rallying to the horizontal resistance at 1.2155-1.2160.
On the other hand, the 38.2% Fibonacci level around the 1.1980 area seems to protect the immediate downside. Sustained weakness below could spark some technical selling and accelerate the pullback towards 1.1900, or the 23.6% Fibonacci level. Further selling would negate the short-term positive bias and make GBP/USD vulnerable.
The next relevant support lies near the 1.1835-1.1830 area before the 1.1800 round figure, below which the GBP/USD pair could aim to challenge the year’s low around the 1.1760 area.
GBP/USD 4-hour chart
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Technical levels
Source: Fx Street
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