GBP/USD Analysis: Struggles near 100-DMA/38.2% Fibo. confluence ahead of UK/US PMIs
Premium|Take advantage of 50% OFF on your first month.
Start your subscription and get access to all our original articles.
You have reached your limit of 5 free articles for this month.
Get Premium without limits for only $9.99 for the first month
Access all our articles, insights, and analysts.
UNLOCK OFFER- The UK political crisis, dismal UK macro data dragged GBP/USD to a two-week low on Friday.
- Rebounding US bond yields revived the USD demand on Monday and continued undermining.
- Investors now look forward to the flash PMI prints from the UK and the US for a fresh impetus.
The GBP/USD pair extended its recent pullback from the vicinity of mid-1.3700s, or a two-month high touched on January 13 and dropped to a near two-week low on Friday. Growing demands for Prime Minister Boris Johnson's resignation over a series of lockdown parties in Downing Street continued undermining sterling, which was further weighed down by dismal UK macro data. In fact, the Office for National Statistics reported that the UK Retail Sales plunged 3.7% in December as against expectations for a fall of 0.6%.
On the other hand, expectations that the Fed will tighten its policy at a faster pace than anticipated acted as a tailwind for the US dollar. Apart from this, an extended sell-off in the equity markets also benefitted the greenback's relative safe-haven status against its British counterpart and contributed to the pair's decline. That said, increasing bets for additional rate hikes by the Bank of England, along with the announcement that COVID-19 restrictions in the UK would be lifted, helped limit losses for the pair.
Nevertheless, the pair finally settled near the lower end of its daily trading range and remained on the defensive through the Asian session on Monday. A goodish rebound in the US Treasury bond yields revived the USD demand and capped the attempted recovery during the Asian session. Market participants now look forward to the release of the flash PMI prints from the UK and the US for a fresh impetus. The focus, however, will remain on the outcome of a two-day FOMC monetary policy meeting starting on Tuesday.
Technical outlook
From a technical perspective, the pair, for now, has managed to defend support marked by the 100-day SMA, currently around the 1.3535 region. This is closely followed by the 38.2% Fibonacci retracement level of 1.3161-1.3749 strong move up, which if broken will be seen as a key trigger for bearish traders. A convincing break below could then drag the pair below the 1.3500 psychological mark, towards the next relevant support near the 50% Fibo. level, around the 1.3455 region.
On the flip side, the 1.3570-1.3580 region, followed by the 23.6% Fibo. level, around the 1.3600-1.3610 zone now seems to act as immediate strong resistance. Any further move up might continue to meet with a fresh supply near the 1.3660 area, which if cleared decisively will suggest that the corrective slide has run its course. Bulls could then aim to reclaim the 1.3700 round-figure mark and eventually lift the pair back towards the monthly swing high, around mid-1.3700s.
- The UK political crisis, dismal UK macro data dragged GBP/USD to a two-week low on Friday.
- Rebounding US bond yields revived the USD demand on Monday and continued undermining.
- Investors now look forward to the flash PMI prints from the UK and the US for a fresh impetus.
The GBP/USD pair extended its recent pullback from the vicinity of mid-1.3700s, or a two-month high touched on January 13 and dropped to a near two-week low on Friday. Growing demands for Prime Minister Boris Johnson's resignation over a series of lockdown parties in Downing Street continued undermining sterling, which was further weighed down by dismal UK macro data. In fact, the Office for National Statistics reported that the UK Retail Sales plunged 3.7% in December as against expectations for a fall of 0.6%.
On the other hand, expectations that the Fed will tighten its policy at a faster pace than anticipated acted as a tailwind for the US dollar. Apart from this, an extended sell-off in the equity markets also benefitted the greenback's relative safe-haven status against its British counterpart and contributed to the pair's decline. That said, increasing bets for additional rate hikes by the Bank of England, along with the announcement that COVID-19 restrictions in the UK would be lifted, helped limit losses for the pair.
Nevertheless, the pair finally settled near the lower end of its daily trading range and remained on the defensive through the Asian session on Monday. A goodish rebound in the US Treasury bond yields revived the USD demand and capped the attempted recovery during the Asian session. Market participants now look forward to the release of the flash PMI prints from the UK and the US for a fresh impetus. The focus, however, will remain on the outcome of a two-day FOMC monetary policy meeting starting on Tuesday.
Technical outlook
From a technical perspective, the pair, for now, has managed to defend support marked by the 100-day SMA, currently around the 1.3535 region. This is closely followed by the 38.2% Fibonacci retracement level of 1.3161-1.3749 strong move up, which if broken will be seen as a key trigger for bearish traders. A convincing break below could then drag the pair below the 1.3500 psychological mark, towards the next relevant support near the 50% Fibo. level, around the 1.3455 region.
On the flip side, the 1.3570-1.3580 region, followed by the 23.6% Fibo. level, around the 1.3600-1.3610 zone now seems to act as immediate strong resistance. Any further move up might continue to meet with a fresh supply near the 1.3660 area, which if cleared decisively will suggest that the corrective slide has run its course. Bulls could then aim to reclaim the 1.3700 round-figure mark and eventually lift the pair back towards the monthly swing high, around mid-1.3700s.
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.