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GBP/USD struggles to preserve modest intraday gains and pulls back towards 1.1700

  • GBP/USD trims modest intraday gains and pulls back to the lower end of its daily range.
  • A combination of factors is helping the dollar trim intraday losses and putting downward pressure.
  • A gloomy economic outlook in the UK supports the prospects for a further short-term depreciation move.

The pair GBP/USD struggles to take advantage of its modest intraday rally to the 1.1760 area and pulls back to the daily low during the early American session. The pair is currently hovering near 1.1700 and remains close to its lowest level since March 2020 touched the previous day.

Intraday optimism in equity markets is running out amid growing concerns about a further global economic downturn. Aside from this, the growing acceptance that the Federal Reserve will continue to tighten monetary policy at a faster pace helps the safe-haven US dollar to regain early lost ground. This turns out to be a key factor attracting selling around the GBP/USD pair to higher levels.

In fact, Fed Chairman Jerome Powell, during his speech at the Jackson Hole Symposium on Friday, signaled that interest rates would stay higher for longer to reduce inflation. Markets were quick to price in a 75 basis point Fed rate hike at the next policy meeting in September. This helps offset a further decline in US Treasury yields and acts as a tailwind for the dollar.

On the other hand, the pound sterling continues to be hurt by the gloomy outlook for the UK economy. It is worth remembering that the Bank of England had predicted earlier this month that the British economy would enter a prolonged recession from the fourth quarter of 2022. This suggests that the path of least resistance for the GBP/USD pair is to the downside and any attempted recovery could be sold.

Next, the US economic calendar, with the publication of the JOLTS job offers and the Conference Board consumer confidence index for the current month. This, coupled with broader market risk sentiment and US bond yields, could weigh on the dollar and provide some lift to the GBP/USD pair. However, attention remains focused on the US employment report (NFP), scheduled for Friday.

Technical levels

GBP/USD

Panorama
Last Price Today 1.1708
Today’s Daily Change -0.0002
Today’s Daily Change % -0.02
Today’s Daily Opening 1,171
Trends
20 Daily SMA 1.1995
50 Daily SMA 1.2039
100 Daily SMA 1.2292
200 Daily SMA 1.2826
levels
Previous Daily High 1.1744
Previous Daily Minimum 1.1649
Previous Maximum Weekly 1.19
Previous Weekly Minimum 1.1717
Monthly Prior Maximum 1.2246
Previous Monthly Minimum 1,176
Daily Fibonacci 38.2% 1.1685
Daily Fibonacci 61.8% 1.1708
Daily Pivot Point S1 1.1658
Daily Pivot Point S2 1.1606
Daily Pivot Point S3 1.1562
Daily Pivot Point R1 1.1753
Daily Pivot Point R2 1.1796
Daily Pivot Point R3 1.1848

Source: Fx Street

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