GBP/USD trims Tuesday’s losses and faces stiff resistance as it approaches 1.3400

• GBP/USD is holding on to its weekly gains, rising as much as 0.56%.
• In the last few hours, the geopolitical headlines eased a bit, although the fundamentals are back in control.
• Federal Reserve Chairman Powell is in favor of a 25 basis point hike at the March meeting and said the bank would begin a plan to start QT.
• GBP/USD Technical Outlook: Bias to the downside, but may rise modestly before resuming downtrend.

the pound sterling recovers part of its losses from the previous day and advances for the second day this week in the renewed talks between Russia and Ukraine, which will meet on Thursday at the border with Belarus. At the time of writing this article, the pair GBP/USD it trades at 1.3381.

Market sentiment is optimistic. European stocks posted gains while US equity indices are rising, to the detriment of FX safe haven pairs. The US Dollar Index, a gauge of the dollar’s value against a basket of six rivals, trims early gains 0.06% lower at 97,380.

Federal Reserve Chairman Powell expects a quarter-point rate hike in March

On Wednesday, Federal Reserve Chairman Jerome Powell appeared before the US Congress. Separately, Powell said he favors a 25 basis point (bps) rate hike in March and said he would start a series of hikes. Powell commented that he is not ruling out a more significant move at any given time. The Fed chairman stressed that the US central bank must be agile due to the uncertainty of the war between Russia and Ukraine.

Powell added that he expects inflation to peak this year and then start to fall, adding that the US central bank will follow through with asset drawdowns of $8.5 trillion.

The US economic docket featured the ADP employment change for February, which rose 475,000 more than the 388,000 estimate and could likely be a prelude to Friday’s Non-Farm Payrolls report.

GBP/USD Price Forecast: Technical Outlook

On Wednesday during the Asian session, the GBP/USD pair was moderate in the 1.3300-35 range. However, due to a risk-off mood in the market, the pound briefly dipped below 1.3271. By the time European traders hit their desks, they bounced off the lows and trimmed previous losses and probe the daily low of 25 Feb at 1.3366.

Despite recouping some of Tuesday’s losses, the British pound remains biased lower. The GBP/USD daily moving averages (DMAs) are above the exchange rate, and the pair is trading below the midline of a descending channel formed since mid-January 2022. However , GBP/USD may be subject to a short-term upside extension before resuming the downtrend.

If that scenario plays out, GBP/USD’s first resistance would be 1.3400. A break of the latter to the upside would expose the 100 DMA at 1.3491, a possible scenario. In the event of a breakout to the upside, although less likely, the next resistance would be 1.3500 and the 50-day DMA at 1.3523.

On the other hand, the first GBP/USD support would be 1.3300, tested five times without success. If it breaks at that level, the next support would be the lower trend line of the descending channel around 1.3260-50, followed by the 1.3200 level.

Additional technical levels