GBP/USD Forecast: Pound fails to break out of range as investors look for next catalyst
- British pound has staged a modest recovery after posting small losses on Wednesday.
- Greenback has shaken off the bearish pressure on hawkish Fed commentary.
- Technical outlook suggests that the pair is likely to stay neutral in the near term.
GBP/USD has started to edge higher after closing the previous three trading days in the negative territory but could find it hard to gather momentum in the absence of fundamental drivers and high-tier macroeconomic data releases.
On Wednesday, the greenback managed to hold its footing despite falling US Treasury bond yields. Hawkish comments from Fed officials helped the dollar find demand. FOMC Chairman Jerome Powell repeated that it was appropriate to consider a faster taper. On a similar note, "a quicker taper gives the Fed room to hike earlier if needed," said Cleveland Fed President Loretta Mester.
Later in the day, the US Department of Labor's weekly Initial Jobless Claims data is likely to be ignored by market participants ahead of Friday's Nonfarm Payrolls report.
On the other hand, the British pound clings to modest recovery gains but the currency's upside is likely to remain capped as investors reassess the possibility of the Bank of England (BoE) opting for a smaller-than-20 basis points hike in December.
In the meantime, Brexit talks are expected to drag into the new year and it would be surprising to see a Brexit-related headline that could impact the market sentiment. For the time being, the pair could continue to fluctuate within technical levels.
GBP/USD Technical Analysis
On the four hour chart, the Relative Strength Index (RSI) indicator is staying near 50, reflecting the pair's indecisiveness in the near term.
On the downside, static support seems to have formed at 1.3280. As long as buyers continue to defend this level, additional gains could be witnessed with a break above 1.3340 (50-period SMA). 1.3380 (100-period) aligns as the next target.
Below 1.3280, supports are located at 1.3240 (static level) and 1.3195 (November 30 low).
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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.
