- GBP/USD has retreated below 1.2150 following the extended rebound.
- 1.2100 aligns as key support for the pair in the near-term.
- USD could stay on the back foot in case markets remain risk-positive ahead of the weekend.
GBP/USD managed to build on Thursday's recovery gains during the Asian trading hours and advanced toward 1.2200. The pair, however, has lost its traction and retreated below 1.2150 in the European morning. If market mood continues to improve ahead of the weekend, the pair is likely to regain its traction.
The European Central Bank reassured markets on Thursday that the banking sector in the Eurozone remains healthy despite Credit Suisse turmoil. Moreover, the action taken by 11 big banks in the United States to help out First Republic Bank with its liquidity issues by depositing $30 billion allowed risk flows to dominate the financial markets in the American session.
Early Friday, the UK's FTSE 100 Index is up nearly 1% and US stock index futures trade modestly higher on the day.
Markets are currently pricing in a nearly 90% probability of a 25 basis points (bps) Fed rate hike at next week's policy meeting. The data releases from the US on Friday, Industrial Production and the University of Michigan's Consumer Confidence Index, are unlikely to alter the market positioning in a significant way. Hence, the risk perception should continue to influence the US Dollar's valuation.
Meanwhile, EUR/GBP cross trades in positive territory slightly below 0.8800. Following the ECB's decision to raise its key rates by 50 bps on Thursday, several ECB policymakers noted that they were expecting to continue to hike rates in the near future. If the Euro's upbeat performance on hawkish ECB bets allows EUR/GBP to preserve its bullish momentum, GBP/USD could have a hard time gathering bullish momentum even if the USD stays on the back foot later in the session.
It's also worth noting that a recently conducted Bank of England (BoE)/Ipsos survey showed that 12-month inflation expectation declined to 3.9% in February from 4.8% in January. Ahead of the BoE's policy meeting, this development could limit Pound Sterling's upside in the near term by highlighting the possible policy divergence with the ECB.
GBP/USD Technical Analysis
On the downside, 1.2100 (Fibonacci 23.6% retracement level of the latest uptrend) aligns as first support. If that level stays intact, GBP/USD needs to confirm 1.2140 as support in order to target 1.2180 (static level, end-point of uptrend) and 1.2200 (psychological level, static level).
In case the pair drops below 1.2100, buyers could move to the sidelines and additional losses toward the 1.2060/1.2050 area, where the 200-period Simple Moving Average (SMA) on the four-hour chart and the 100-day SMA are located, could be witnessed. A daily close below this region could be seen as a significant bearish development and open the door for an extended decline toward 1.2000 (psychological level, Fibonacci 50% retracement).
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. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD trims gains after reaching weekly highs at 1.0925 Premium
EUR/USD peaked at 1.0925 on Thursday, the highest level in a week, then retreated to the 1.0900 area. The pair is holding on to strong daily gains, on its way to the highest daily close since early February, supported by a weaker US Dollar ahead of Friday’s US Core PCE data.
GBP/USD eyes 1.2400 as Pound outperforms
The Pound is among the top performers of the American session. GBP/USD is trading at the highest level in almost two months, near 1.2400. Risk flows are helping the pair while at the same time making it difficult for the US Dollar to find demand.
Gold: Bulls aiming to challenge the $2,000 threshold Premium
Spot Gold found demand during American trading hours and currently trades around the $1,980 level. Following a consolidative stage, the bright metal gained upward traction on the back of continued US Dollar weakness.
Cardano might have a bumpy road following a 25% recovery
Cardano price has had a disappointing run these last two weeks when compared to other major altcoins.
FTSE100 up for 4th day in a row, hits 2-week high
We’ve seen another positive day for European markets with the FTSE100 pushing up to its highest levels in 2 weeks, although it remains well short of reversing its March losses, unlike the DAX which has reversed nearly all its post 9th March decline.