GBP/USD struggles near 1.2600 and retraces to 1.2530s, on risk-aversion
|- Sterling clings to weekly gains of 0.42% amidst political turmoil and Brexit jitters.
- A risk-off mood, and high US bond yields, boosted the greenback and weighed on the GBP.
- GBP/USD Price Forecast: Still neutral-downwards, though a daily close below 1.2500 will send the pair tumbling towards 1.2400.
The GBP/USD remains in a consolidation phase, within the 1.2450-1.2670 area, below the 50-day moving average (DMA) at 1.2676, for the eighth consecutive trading day, as risk-aversion increased demand for the greenback. At 1.2539, the GBP/USD reflects the aforementioned in the New York session.
Risk-aversion and elevated US Treasury yields weighed on the GBP
Wall Street’s preparing to finish the day with losses as high US Treasury yields weigh on stocks. Also, underpin the greenback, as the US Dollar Index records gains of 0.18%, sitting at 102.517. In the bond market, the US 10-year T-note rate is rising five basis points, sitting at 3.029%. So, the leading causes of the GBP falling are those mentioned above, alongside UK’s ongoing economic slowdown, as the Bank of England (BoE) gets ready for another rate hike, despite the stagflation scenario.
On Wednesday, the GBP/USD achieved to open near the session’s highs, at 1.2597. Nevertheless, since the beginning of the trading day, the pound dipped towards the daily lows at around 1.2513, followed by a jump towards the 200-hour simple moving average (SMA) at 1.2565. Late in the New York session, cable settled at around the daily pivot, 1.2540s.
In the meantime, the OECD slashed the global economic outlook for 2022 and 2023. The organization expects the worldwide economy to grow 3.0% YoY in 2022, lower than the 4.5% estimated. Previous expectations were at 3.2% for 2023, though the OECD expects growth to hit 2.8% yearly.
The UK economic docket will feature no tier 1 economic data in the week ahead. Contrarily, the US calendar will unveil Initial Jobless Claims, the consumer inflation report, and the UoM consumer sentiment.
GBP/USD Price Forecast: Technical outlook
Despite the ongoing correction, which lifted the major from year-to-date lows at 1.2155 towards 1.2670s, the Sterling remains neutral-downward biased. Further confirming the previously mentioned is the Relative Strenght Index (RSI), at 48.76, even though in bearish territory, lacks the impetus to drag the GBP/USD lower.
In the near term, the GBP/USD’s first resistance would be the 50-day moving average (DMA) at 1.2675. On the other hand, the GBP/USD’s first demand zone would be 1.2500, followed by the June 7 swing low at 1.2430, followed by the 1.2400 figure.
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