GBP/USD Price Analysis: Drops to 1.3670 area, fresh daily lows amid stronger USD
|- GBP/USD came under renewed selling pressure on Friday amid resurgent USD demand.
- Failure near 200-hour SMA and a subsequent fall below 1.3700 favours bearish traders.
The GBP/USD pair struggled to capitalize on the previous day's strong positive move to weekly tops and came under renewed selling pressure on Friday. The downward trajectory extended through the mid-European session and dragged the pair to fresh daily lows, around the 1.3670 region in the last hour.
Lingering concerns about the fate of debt-ridden China Evergrande Group tempered investor's appetite for perceived riskier assets and led to a modest pullback in the equity markets. Apart from this, a generally positive tone around the US Treasury bond yields helped revive demand for the safe-haven US dollar. This, in turn, was seen as a key factor that exerted downward pressure on the GBP/USD pair.
Looking at the technical picture, a more hawkish Bank of England-inspired bullish momentum faltered near the 200-hour SMA resistance, around mid-1.3700s. A subsequent slide below the 1.3700 round-figure mark was seen as a fresh trigger for intraday bearish traders. This, in turn, might have already set the stage for the resumption of the recent downward trajectory witnessed over the past two weeks.
The outlook is reinforced by the fact that technical indicators on the daily chart maintained their bearish bias and have again started gaining negative traction on the 4-hour chart. That said, RSI (14) on the 1-hour chart have moved on the verge of breaking into the oversold territory. This warrants some caution before positioning for any further decline ahead of Fed Chair Jerome Powell's speech.
From current levels, some follow-through selling below the 1.3660 region will reaffirm the negative bias and allow bears to aim back to challenge the 1.3600 round-figure mark. This is followed by July swing lows, around the 1.3570 region, which if broken decisively would turn the GBP/USD pair vulnerable. The next relevant support is pegged near the key 1.3500 psychological mark.
On the flip side, the 1.3700 mark now seems to act as an immediate strong resistance ahead of the 200-hour SMA, currently around the 1.3735-40 region. A sustained breakthrough, leading to a subsequent move beyond mid-1.3700s, should pave the way for additional gains. The GBP/USD pair might then climb to the 1.3840-50 region en-route the 1.3900 mark and monthly tops, around the 1.3910-15 area.
GBP/USD 1-hour chart
Technical levels to watch
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