- GBP/USD seems to have found interim support near 1.3350.
- US Dollar Index continues to push higher ahead of US inflation data.
- Risk-averse market environment puts additional weight on the British pound.
GBP/USD has suffered heavy losses on Thursday and its recovery attempt seems to have met stiff resistance around 1.3400. Although the pair is holding above the 1.3350 support, for the time being, it remains fragile heading into the weekend.
The greenback preserves its strength early Friday as investors continue to price in an aggressive policy tightening by the US Federal Reserve following the January policy meeting. The US Dollar Index (DXY) is sitting at its highest level in nearly 19 months above 97.30 and doesn't yet show any signs of a loss of bullish momentum.
Later in the session, the US Bureau of Economic Analysis will release the December Personal Consumption Expenditures (PCE) Price Index data.
On a yearly basis, the PCE Price Index is forecast to rise to 6.1% from 5.7% in November. FOMC Chairman Jerome Powell made it clear on Wednesday that the inflation situation is worse than it was in December and confirmed their willingness to take action to ease price pressures. Hence, a stronger-than-expected print is likely to provide an additional boost to the dollar in the second half of the day.
On the other hand, a potential retreat in the DXY is likely to remain short-lived even if the PCE inflation report helps ease inflation fears.
GBP/USD Technical Analysis
Initial support for GBP/USD is located at 1.3350 (static level). The fact that the Relative Strength Index (RSI) indicator on the four-hour chart holds near 30 suggests that the pair could make a technical correction before targeting new lows.
Unless the upper limit of the descending regression channel, which is currently located at 1.3420, is broken, however, sellers should be able to continue to dominate the pair's action. 1.3400 (psychological level) could also act as interim resistance.
On the downside, 1.3300 (psychological level) could be seen as the next bearish target if 1.3350 turns into resistance.
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