- GBP/USD pares corrective bounce off short-term key support confluence.
- US credit rating cut triggered Cable’s rebound before the risk-off mood, BoE fears weigh on the quote.
- 50-EMA, five-month-old support line restricts short-term Pound Sterling downside.
- Bulls need validation from convergence of 21-EMA, previous support line from late May and 13-day-old resistance line to retake control.
GBP/USD reverses the latest Tuesday’s corrective bounce off 1.2750 support confluence by retreating to 1.2780 during the early hours of Wednesday’s Asian session. In doing so, the Cable pair justifies the market’s risk-off mood driven by the US credit rating cut, as well as takes clues from the dovish concerns about the Bank of England’s (BoE).
Also read: Fitch downgrades US government’s AAA credit rating to AA+, US Dollar retreats
Apart from the US Dollar’s recent jump, following an initial retreat due to the credit downgrade news, the cautious mood ahead of the US ADP Employment Change and the fears of the UK recession also weigh on the GBP/USD price.
Technically, the bearish MACD signals and steady RSI (14) line joins the Pound Sterling’s inability to defend the bounce off the key 1.2750 support confluence, comprising the 50-EMA and a five-month-old rising trend line, to keep the bears hopeful.
However, a clear downside break of 1.2750 becomes necessary for the GBP/USD bears to rule further. In that case, May’s high of 1.2680 and late June’s swing low of around 1.2590 will lure the sellers.
On the other hand, the 21-EMA, two-week-old descending trend line and the support-turned-resistance line from late May together highlight the 1.2860 as the short-term key upside hurdle for the GBP/USD buyers to watch during the recovery moves.
Following that, a run-up towards the late July swing high of around 1.2995 and to the 1.3000 psychological magnet can’t be ruled out.
GBP/USD: Daily chart
Trend: Further downside expected
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