- GBP/USD has failed to reclaim 1.3100 following Wednesday's decline.
- The dollar continues to gather strength on the hawkish FOMC outlook.
- Markets are pricing a nearly-80% probability of a 50 bps Fed hike in May.
GBP/USD has extended its slide into a fifth straight day on Thursday after having failed to reclaim 1.3100. The pair remains bearish in the short term and sellers could take action in case 1.3050 support fails.
The unabated dollar strength is forcing GBP/USD to stay on the back foot this week. Although the British pound stays relatively resilient against the greenback amid the sharp decline witnessed in EUR/GBP, the hawkish Fed policy outlook doesn't allow GBP/USD to gain traction.
The minutes of the FOMC's March policy meeting revealed on Wednesday that participants agreed it would be appropriate to move the policy toward a neutral posture "expeditiously." More importantly, The publication showed many policymakers noted that they would have preferred a 50 basis points (bps) hike in March and that May would be the right time to start reducing the balance sheet.
The US Dollar Index was last seen sitting at its highest level since May 2020, reflecting the positive impact of the Fed's aggressive tightening stance on the currency. In the meantime, the CME Group FedWatch Tool shows that markets are currently pricing a 78.8% chance of a 50 bps rate increase at the next meeting, suggesting that the dollar still has some more room on the upside.
The US economic docket will offer the weekly Initial Jobless Claims data on Thursday. St. Louis Fed President James Bullard, Chicago Fed President Charles Evans and Atlanta Fed President Raphael Bostic will be delivering speeches later in the day as well.
Unless Fed policymakers downplay the prospects of double dose rate hikes in the upcoming meetings, GBP/USD is likely to have a tough time staging a decisive recovery.
GBP/USD Technical Analysis
After falling below 1.3100, GBP/USD started using that level as resistance, which could be seen as a bearish sign. Additionally, the Relative Strength Index (RSI) indicator on the four-hour chart stays below 50, confirming the lack of buyers' interest.
On the downside, 1.3050 (static level) aligns as first support. With a four-hour close below that level, the pair could extend its decline toward 1.3000 (psychological level).
Resistances are located at 1.3100 (psychological level, former support), 1.3140 (100-period SMA) and 1.3160 (static level).
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