GBP/USD Forecast: Buyers hesitate as Pound Sterling fails to hold above 1.2700

GBP/USD trades below 1.2700 in the European session on Tuesday.
The pair could find support in case risk mood improves later in the day.
Next technical support for GBP/USD is located at 1.2650.

Eren Sengezer FXStreet

GBP/USD closed the first day of the week virtually unchanged but came under modest bearish pressure early Tuesday. The pair trades below 1.2700 in the European session and the technical outlook points to a lack of buyer interest.

The cautious market stance supports the US Dollar (USD) and makes it difficult for GBP/USD to gain traction early Tuesday as investors remain concerned about a deepening conflict in the Middle East. Reflecting the sour mood, US stock index futures trade in negative territory. Meanwhile, the UK's FTSE 100 Index opened higher before retreating modestly.

In case Wall Street's main indexes turn north after the opening bell, the USD could lose its strength and help GBP/USD limit its losses.

The US economic docket will feature December JOLT Job Openings data and the Conference Board's Consumer Confidence Index, which improved to 110.7 in December from 101.0 in November, for January. An upbeat sentiment reading could help the USD find demand but investors are unlikely to take large positions ahead of the Federal Reserve and the Bank of England policy announcements on Wednesday and Thursday, respectively.

GBP/USD Technical Analysis

GBP/USD continued to stretch lower after closing the last 4-hour candle below the 200-period Simple Moving Average (SMA). Meanwhile, the Relative Strength Index (RSI) on the same chart declined toward 40, reflecting a build-up of bearish momentum.

On the downside, 1.2650 (Fibonacci 23.6% retracement of the latest uptrend) aligns as first support before 1.2600 (psychological level, static level) and 1.2560 (200-day SMA).

First resistance is located at 1.2700 (200-period SMA, 100-period SMA, 50-period SMA). If the pair stabilizes above that level, 1.2760 (static level) and 1.2780 (static level) could be seen as next hurdles.

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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