GBP/USD returns modest intraday gains, falls to daily lows near 1.2000 before Powell

  • GBP/USD attracts some intraday selling after an initial rally that saw it reach a four-day high.
  • Recession fears and hawkish expectations around the Fed act as a tailwind for the USD and limit the pair’s gains.
  • Traders are looking forward to testimony from Fed Chairman Jerome Powell before entering directional positions.

He GBP/USD fails to capitalize on its positive intraday move towards a four-day high and meets new selling near the 1.2065 region on Tuesday. At the time of writing, the pair falls to new daily lows, near the 1.2000 leveland remains at the mercy of the price dynamics of the US dollar.

The generally positive tone in equity markets, coupled with the decline in US Treasury yields, weighed on the safe-haven USD initially and offered some support to GBP/USD. However, recessionary risks continue to dampen any upbeat move in markets. Apart of this, prospects for further tightening of monetary policy by the Federal Reserve They act as a tailwind for US bond yields, which in turn offer support to the dollar and limit the pair’s upside, at least for now.

Investors seem convinced that the US central bank will maintain its aggressive stance and will keep raising interest rates for longer due to the persistent rise in inflation. These expectations were bolstered by US macroeconomic data, which indicated that inflation is not declining as fast as expected and pointed to an economy continuing to hold up despite rising borrowing costs. On the other hand, a number of FOMC policymakers recently backed rate hikes and opened the door to a 50 basis point hike at the March meeting.

Hence the markets continue pending semi-annual statements to Congress by Fed Chairman Jerome Powell, Tuesday and Wednesday. Investors will be looking for clues as to the Fed’s future rate hike path, which will play a key role in influencing near-term dollar price dynamics and provide further directional momentum to GBP/USD. Meanwhile, Anxiety over the new UK-EU Brexit deal over the Northern Ireland Protocol seems to further curb bulls when opening new positions around the pair.

Meanwhile, price developments indicate that a further rate hike by the Bank of England (BoE) is already fully discounted in the markets. Furthermore, some analysts continue waiting for the UK central bank to interrupt the current tightening cycle. This, in turn, suggests that the path of least resistance for GBP/USD is down and any significant rise could be seen as a selling opportunity. That being said, sustained weakness below the 200-day SMA is needed to confirm a further break down.

GBP/USD technical levels to watch

GBP/USD

Panorama
Last Price Today 1.2012
Today’s Daily Change -0.0007
Today’s Daily Change % -0.06
Today’s Daily Open 1.2019
Trends
20 Daily SMA 1.2047
SMA of 50 Daily 1,214
SMA of 100 Daily 1.1992
SMA of 200 Daily 1.1913
levels
Previous Daily High 1.2049
Minimum Previous Daily 1.1993
Previous Weekly High 1.2143
Previous Weekly Minimum 1.1922
Maximum Prior Monthly 1.2402
Minimum Prior Monthly 1.1915
Daily Fibonacci 38.2% 1.2014
Daily Fibonacci 61.8% 1.2028
Daily Pivot Point S1 1.1992
Daily Pivot Point S2 1.1964
Daily Pivot Point S3 1.1936
Daily Pivot Point R1 1.2047
Daily Pivot Point R2 1.2076
Daily Pivot Point R3 1.2103

Source: Fx Street

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