GBP/USD Forecast: Dead cat Brexit bounce ahead of Powell's power play

The GBP/USD is unable to take advantage of the USD breather.
Concerns of a no-deal Brexit weigh on the Pound.
The technical picture shows that upside momentum has disappeared.

Yohay Elam FXStreet

The GBP/USD is trading just above 1.2800. The US Dollar is taking a breather ahead of Fed Chair Jerome Powell's speech at Jackson Hole. However, cable is unable to take advantage of it and remains pressured.

The British government released a series of notices towards a no-deal Brexit on Thursday. UK Brexit Minister Dominic Raab said that he is optimistic about getting a "good deal". Nevertheless, there have been no reports about progress in the negotiations and the publication of the no-deal papers served as a reminder that crashing out is a plausible outcome.

In the US, data was not that great, with New Home Sales providing the second day of housing disappointments. However, the US Dollar advanced as trade talks between China and the US were inconclusive. The greenback moves higher on escalations in the trade wars.

The focus shifts back to the Federal Reserve as Chair Jerome Powell speaks in Jackson Hole at 14:00 GMT. While a September hike is priced in, the focus will be long-term trends and Powell can move markets.

See: Powell's Jackson Hole Speech: Three topics to watch out for beyond the September hike

Before Powell's public appearance, the US publishes the Durable Goods Orders for July, the first month of Q3. A slide is expected after significant increases beforehand.

See: US Durable Goods Orders preview: activity seen easing in July

GBP/USD Technical Analysis

GBP USD Forecast August 24 2018 technical chart

The GBP/USD has lost upwards momentum and the Relative Strength Index is flat.

Support awaits at the round 1.2800 level which supported the pair in recent hours. It is backed up by the 50 Simple Moving Average on the four-hour chart. Further down, 1.2760 held the pair down in mid-August and now serves as a support. Lower, 1.2730 was a stepping stone on the way up later in the month. The 2018 low of 1.12662 is next.

1.2940 was the peak seen in recent days. It is followed by the round number of 1.3000 and then by 1.3050 which worked in both directions before the recent fall.

More: GBP/USD at critical support, break or bounce? — Confluence Detector

Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

EUR/USD stays defensive below 1.1600 as USD rebounds

EUR/USD trades marginally lower below 1.1600 in the European session on Friday. The pair edges down as the US Dollar rebounds slightly after Thursday’s massive profit-taking pullback. Looming US-Iran uncertainty revives the haven demand for the Greenback, while the Euro takes a breather after the hawkish ECB hike-led rally.

GBP/USD holds steady above 1.3400 ahead of US sentiment data

GBP/USD recovers losses and trades modestly flat above 1.3400 in the European trading hours on Friday. The UK Gross Domestic Product (GDP) declined by 0.1% in April, limiting the pair's upside amid renewed US Dollar weakness. The focus now remains on the US Michigan Consumer Sentiment data.

Gold flatlines above $4,200; bearish bias intact amid US-Iran risks

,Gold recovers modest intraday losses, and turns flat during the first half of the European session, though it remains below the daily peak. Despite uncertainty over the US-Iran peace deal, a steadier mood fails to help the US Dollar in preserving its gains. This is seen as a key factor offering some support to the commodity.

Pi Network: Bulls attempt comeback as bearish strength fades

Pi Network (PI) is trading at around $0.120 after a modest recovery the previous day. Despite this recent rebound, traders should be cautious as a scheduled unlock of 14.8 million PI tokens on Friday could limit the token's recovery potential by increasing market supply. Meanwhile, the technical outlook is showing early signs of fading bearish momentum, suggesting a short-term bounce.

Week ahead – Central bank barrage ahead: Fed, BoJ, RBA, SNB and BoE in focus

The US dollar outperformed most of its major counterparts this week, with investors remaining convinced that the Fed may need to press the rate hike button before the end of this year. Fed hike bets were significantly bolstered after the US jobs report for May came in much stronger than expected, with nonfarm payrolls rising to 172k and confounding expectations of a much more modest 85k gain.

4.2% headline, 0.2% core: Why the Fed's next hike may be targeting the wrong problem

May's CPI put headline inflation at 4.2% on the year, up from 3.8% in April and the hottest reading since April 2023, while core prices rose just 0.2% on the month, undershooting the 0.3% consensus and halving April's pace.