- GBP/USD has lost its traction and declined below 1.2200 early Thursday.
- The short-term technical outlook suggests that buyers are struggling to retain control.
- Risk mood is likely to continue to influence the pair's action.
GBP/USD has lost its traction and retreated below 1.2200 in the early European morning on Thursday after having registered modest gains on Wednesday. The near-term technical outlook suggests that the pair is having difficulty turning bullish. In the absence of high-impact data releases, GBP/USD is likely to react to changes in risk mood. Nevertheless, investors are unlikely to commit to large positions ahead of next week's highly-anticipated Bank of England and Federal Reserve policy meetings.
The sharp decline witnessed in the US Treasury bond yields amid renewed concerns over an economic downturn caused the US Dollar to lose interest in the second half of the day on Wednesday and allowed GBP/USD to stretch higher.
The 10-year US T-bond yield, which touched a multi-month low of 3.4% on Wednesday, was last seen rising more than 1% on the day at 3.45%, helping the US Dollar hold its ground for the time being.
In the meantime, US stock index futures were up between 0.15% and 0.3%, pointing to a slight improvement in market sentiment. In case Wall Street's main indexes turn north after the opening bell, GBP/USD could start edging higher with the US Dollar struggling to attract investors and vice versa.
The only data featured in the US economic docket will be the weekly Initial Jobless Claims on Thursday. It would be surprising if that data were to trigger a noticeable market reaction.
GBP/USD Technical Analysis
GBP/USD broke below 1.2200, where the lower limit of the ascending regression channel and the 20-period Sİmple Moving Average (SMA) on the four-hour chart align. Additionally, the Relative Strength Index (RSI) indicator declined below 50, confirming the lack of buyer interest in the pair.
On the downside, 1.2150 (50-period SMA) aligns as first support before 1.2100 (psychological level, Fibonacci 23.6% retracement of the latest uptrend) and 1.2050 (100-period SMA).
In case GBP/USD manages to reclaim 1.2200 and stabilize above that level, it could stage a rebound toward 1.2270 (mid-point of the ascending channel) and 1.2300 (psychological level).
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