- GBP/USD has extended its slide to fresh multi-week lows on Friday.
- The risk-averse market atmosphere doesn't allow the pair to stage a rebound.
- The pair trades near a key short-term support level.
GBP/USD has stretched lower and touched its lowest level since early January below 1.1950 after having closed below 1.2000 on Thursday. The pair is trading near the key support that seems to have formed at 1.1930 and the technical outlook suggests that there could be a short-term rebound if that level holds.
The broad-based US Dollar (USD) strength weighed heavily on GBP/USD in the second half of the week. Hawkish comments from Fed policymakers and the latest macroeconomic data releases revived expectations that the Fed could opt to do additional rate hikes even after May. In turn, the benchmark 10-year US Treasury bond yield advanced to its highest level in nearly three months above 3.9% and provided a boost to the USD.
The Core Producer Price Index in the US declined slightly to 5.4% in January from 5.5% in December and beat the market forecast of 4.9%. Additionally, the weekly Initial Jobless Claims came in below 200K for the fifth straight week, confirming tight labor market conditions.
According to the CME Group FedWatch Tool, markets are pricing in a nearly 60% probability that the Fed will at least rise its policy rate three more times by 25 basis points, compared to only 40% a week ago.
Meanwhile, the UK's Office for National Statistics reported on Friday that Retail Sales increased by 0.5% on a monthly basis in January. Although this reading came in better than the market expectation for a decrease of 0.3%, December's print of -1% got revised lower to -1.2%, not allowing the Pound Sterling to benefit from that data.
The US economic docket will not offer any macroeconomic data releases that could impact the US Dollar's performance in a significant way. Hence, market participants will pay close attention to risk perception. US stock index futures are down between 0.5% and 0.9% in the European session. Another bout of flight to safety should help the USD end the week on a firm footing while an improvement in risk mood should have the opposite effect.
GBP/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the four-hour chart is about to drop below 30 to show oversold conditions. GBP/USD also trades near the lower limit of the descending regression channel coming from early February at 1.1930.
In case that level holds, GBP/USD could recover toward 1.1960 (former support, static level) and 1.2000 (psychological level, static level). If the pair manages to reclaim that level, additional buyers could come in and open the door for a leg higher toward 1.2060/70 (50-period Simple Moving Average, Fibonacci 50% retracement of the latest uptrend).
On the downside, GBP/USD could stretch lower toward 1.1900 (psychological level) and 1.1850 (static level) once 1.1930 support fails.
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 holds steady near 1.0500 ahead of FOMC Minutes
EUR/USD trades marginally higher on the day near 1.0500. The US Dollar struggles to preserve its strength amid a modest improvement seen in risk sentiment, helping EUR/USD hold its ground before the Fed publishes the minutes of the November policy meeting.
GBP/USD struggles to hold above 1.2600
GBP/USD loses its traction and trades below 1.2600 after rising above this level earlier in the day. Nevertheless, the pair's losses remain limited as the US Dollar struggles to find demand following mixed data releases. Markets await FOMC Minutes.
Gold under pressure below $2,630
Gold fluctuates above $2,600 on Tuesday after sliding almost three percent – a whopping $90 plus – on Monday due to rumors Israel and Hezbollah were on the verge of agreeing on a ceasefire. Whilst good news for Lebanon, this was not good news for Gold as it improved the outlook for geopolitical risk.
Trump shakes up markets again with “day one” tariff threats against CA, MX, CN
Pres-elect Trump reprised the ability from his first term to change the course of markets with a single post – this time from his Truth Social network; Threatening 25% tariffs "on Day One" against Mexico and Canada, and an additional 10% against China.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
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.