GBP/USD forecast: Gearing up for some near-term short-covering bounce

Growing fears of a no-deal Brexit continue to weigh on the British Pound.
Sliding US bond yields undermined the USD and helped limit the downside.
In-line UK CPI largely offset by softer PPI print and does little to influence.

Haresh Menghani FXStreet

The GBP/USD pair remained depressed and touched a fresh 27-month low level of 1.2382 during the early European session on Wednesday amid persistent Brexit-related uncertainty. The sentiment deteriorated further after both the UK PM candidates - Boris Johnson and Jeremy Hunt criticized the Irish backstop and pledged to take it away from any future negotiation with the EU. This coupled with the fact that the EU is in no mood to renegotiate the conditions continued fueling fears of a no-deal Brexit and kept exerting some downward pressure.

Meanwhile, a fresh leg of a slide in the US Treasury bond yields failed to assist the US Dollar to build on the overnight goodish up-move - further boosted by upbeat US monthly retail sales data and turned out to be one of the key factors lending some support to the major. The GBP bulls further took cues from mostly in line UK consumer inflation figures, albeit softer UK PPI figures kept a lid on any attempted intraday bounce beyond the 1.2400 round figure mark.

Wednesday's economic docket also features the release of US housing market data - building permits and housing starts, which might influence the USD price dynamics and produce some short-term trading opportunities later during the early North-American session.

From a technical perspective, the pair has now moved within the striking distance of an important support marked by a four-month-old descending trend-channel. Moreover, technical indicators on the daily chart have moved on the verge of breaking into the oversold territory, setting the stage for some near-term short-covering bounce. Any meaningful recovery might now confront some fresh supply near the 1.2460 region, above which the pair is likely to aim towards reclaiming the key 1.2500 psychological mark.

On the flip side, the mentioned support - currently near the 1.2365 region, should protect the immediate downside, below which the pair is likely to accelerate the slide, though might attract some buying near the 1.2300 round figure mark.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

EUR/USD meets initial support around 1.1800

EUR/USD remains on the back foot, although it has managed to reverse the initial strong pullback toward the 1.1800 region and regain some balance, hovering around the 1.1850 zone as the NA session draws to a close on Tuesday. Moving forward, market participants will now shift their attention to the release of the FOMC Minutes and US hard data on Wednesday.

GBP/USD bounces off lows, retargets 1.3550

After bottoming out just below the 1.3500 yardstick, GBP/USD now gathers some fresh bids and advances to the 1.3530-1.3540 band in the latter part of Tuesday’s session. Cable’s recovery comes as the Greenback surrenders part of its advance, although it keeps the bullish bias well in place for the day.

Gold remains offered below $5,000

Gold stays on the defensive on Tuesday, receding to the sub-$5,000 region per troy ounce on the back of the persistent move higher in the Greenback. The precious metal’s decline is also underpinned by the modest uptick in US Treasury yields across the spectrum.

RBNZ set to pause interest-rate easing cycle as new Governor Breman faces firm inflation

The Reserve Bank of New Zealand remains on track to maintain the Official Cash Rate at 2.25% after concluding its first monetary policy meeting of this year on Wednesday.

UK jobs market weakens, bolstering rate cut hopes

In the UK, the latest jobs report made for difficult reading. Nonetheless, this represents yet another reminder for the Bank of England that they need to act swiftly given the collapse in inflation expected over the coming months.

Ripple slides to $1.45 as downside risks surge

Ripple edges lower at the time of writing on Tuesday, from the daily open of $1.48, as headwinds persist across the crypto market. A short-term support is emerging at $1.45, but a buildup of bearish positions could further weaken the derivatives market and prolong the correction.