- GBP/USD gained strong positive traction on Monday and was supported by modest USD weakness.
- The recent drop in US bond yields and a positive risk tone undermined the dollar’s haven.
- Aggressive bets on the Fed rate hike coupled with recession fears should cap dollar losses and cap the pair.
The pair GBP/USD is experiencing some short covering moves on the first day of a new week and is taking advantage of Friday’s late recovery from the 1.1975 region, or the lowest level since June 14. The momentum is extending into the mid-European session and is taking the price to a new daily high, around the 1.2165 area in the last hour.
The recent decline in US Treasury bond yields, coupled with signs of stability in equity markets, have undermined the haven of the US dollar. This, in turn, is seen as a key factor acting as a tailwind for the GBP/USD pair. That said, a significant upside move still looks unlikely, which warrants caution on the part of the bulls.
Federal Reserve Chairman Jerome Powell last week reaffirmed market bets on more aggressive rate hikes and said the US central bank remains focused on controlling inflation. Powell added that the US economy is well positioned to handle a tougher policy. Also, growing recession fears should limit dollar losses.
On the other hand, the Bank of England is expected to take a gradual approach to raising interest rates amid the worsening economic outlook. Additionally, renewed tensions between the UK and the European Union over the Northern Ireland Protocol to the Brexit deal could deter sterling bulls from making aggressive bets.
The fundamental backdrop makes it prudent to wait for strong follow-on buying before confirming that GBP/USD has bottomed in the short term and positioning for further gains. Additionally, traders could be hesitant amid relatively low volumes due to the US holidays and awaiting key releases this week.
The minutes of the meeting of the Federal Open Market Committee (FOMC) will be published on Wednesday and on Friday the key data on employment in the United States. Investors will closely examine the FOMC minutes and the NFP report for clues on the Fed’s tightening path. All of this will influence the dynamics of the dollar price and give a new impetus to the GBP/ USD.
Technical levels
GBP/USD
Panorama | |
---|---|
Last Price Today | 1.2154 |
Today’s Daily Change | 0.0055 |
Today’s Daily Change % | 0.45 |
Today’s Daily Opening | 1.2099 |
Trends | |
---|---|
20 Daily SMA | 1.2277 |
50 Daily SMA | 1.2399 |
100 Daily SMA | 1.2803 |
200 Daily SMA | 1.3154 |
levels | |
---|---|
Previous Daily High | 1,218 |
Previous Daily Minimum | 1.1976 |
Previous Maximum Weekly | 1.2332 |
Previous Weekly Minimum | 1.1976 |
Monthly Prior Maximum | 1.2617 |
Previous Monthly Minimum | 1.1934 |
Daily Fibonacci 38.2% | 1.2054 |
Daily Fibonacci 61.8% | 1.2102 |
Daily Pivot Point S1 | 1,199 |
Daily Pivot Point S2 | 1.1881 |
Daily Pivot Point S3 | 1.1786 |
Daily Pivot Point R1 | 1.2194 |
Daily Pivot Point R2 | 1.2289 |
Daily Pivot Point R3 | 1.2398 |
Source: Fx Street
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