- GBP/USD has failed to reclaim 1.2100 following the earlier recovery attempt.
- The pair could face further bearish pressure if 1.2050 support fails.
- The positive shift witnessed in risk sentiment helps the pound limit its losses.
GBP/USD has lost its recovery momentum after having climbed above 1.2100 earlier in the day. The pair faces significant support at 1.2050 and sellers are likely to dominate the pricing action if that level fails.
The upbeat July jobs report from the US allowed hawkish Fed bets to return and triggered a dollar rally ahead of the weekend. Nonfarm Payrolls in the US rose by 528,000, surpassing the market expectation of 250,000, and the Unemployment Rate edged lower to 3.5% from 3.6%. According to the CME Group FedWatch Tool, markets are now pricing in a nearly 70% probability of a 75 basis points rate increase in September.
During an appearance before the Kansas Bankers Association on Saturday, Fed Governor Michelle Bowman said that she strongly supports "super-sized" rate hikes to fight inflation.
The hawkish tilt in the Fed's rate outlook and the Bank of England's (BOE) gloomy outlook suggests that the policy gap could continue to widen and allow investors to continue to favour the dollar over the British pound.
There won't be any high-tier macroeconomic data releases on Monday and the risk perception could impact the pair's action in the short term. The UK's FTSE 100 Index is rising nearly 0.5% at the beginning of the week and US stock index futures are up between 0.2% and 0.45% during the European trading hours. In case the market environment remains risk-positive in the second half of the day, GBP/USD's downside could remain limited. Nevertheless, market participants are unlikely to bet on a steady rebound in the pair ahead of the highly-anticipated US inflation report on Wednesday.
GBP/USD Technical Analysis
The Fibonacci 50% retracement level of the latest uptrend forms significant support at 1.2050. The 200-period and the 100-period SMAs on the four-hour chart reinforce that level as well. In case sellers drag the pair below that level, additional losses toward 1.2000 (psychological level, Fibonacci 50% retracement) and 1.1920 (static level) could be witnessed.
On the other hand, 1.2100 (psychological level, Fibonacci 38.2% retracement) aligns as significant resistance. If the pair starts using that level as support, technical recovery could stretch higher toward 1.2150 (50-period SMA) and 1.2175 (Fibonacci 23.6% retracement).
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD extends recovery beyond 1.0400 amid Wall Street's turnaround
EUR/USD extends its recovery beyond 1.0400, helped by the better performance of Wall Street and softer-than-anticipated United States PCE inflation. Profit-taking ahead of the winter holidays also takes its toll.
GBP/USD nears 1.2600 on renewed USD weakness
GBP/USD extends its rebound from multi-month lows and approaches 1.2600. The US Dollar stays on the back foot after softer-than-expected PCE inflation data, helping the pair edge higher. Nevertheless, GBP/USD remains on track to end the week in negative territory.
Gold rises above $2,620 as US yields edge lower
Gold extends its daily rebound and trades above $2,620 on Friday. The benchmark 10-year US Treasury bond yield declines toward 4.5% following the PCE inflation data for November, helping XAU/USD stretch higher in the American session.
Bitcoin crashes to $96,000, altcoins bleed: Top trades for sidelined buyers
Bitcoin (BTC) slipped under the $100,000 milestone and touched the $96,000 level briefly on Friday, a sharp decline that has also hit hard prices of other altcoins and particularly meme coins.
Bank of England stays on hold, but a dovish front is building
Bank of England rates were maintained at 4.75% today, in line with expectations. However, the 6-3 vote split sent a moderately dovish signal to markets, prompting some dovish repricing and a weaker pound. We remain more dovish than market pricing for 2025.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.