GBP/USD Forecast: Pound Sterling could struggle to find direction

GBP/USD lost its traction and declined to the 1.2150 area.
The pair's near-term technical outlook points to a lack of directional momentum.
Investors could move to the sidelines ahead of this week's key events.

Eren Sengezer FXStreet

In the absence of high-impact data releases, GBP/USD benefited from the risk-positive market atmosphere on Monday and climbed toward 1.2200. The pair lost its traction early Tuesday amid renewed US Dollar (USD) strength and declined to the 1.2150 area.

Wall Street's main indexes opened decisively higher and registered impressive gains on the first trading day of the week. As Israeli Prime Minister Benjamin Netanyahu said that he will not agree to a cease-fire, the risk rally lost its steam on Tuesday. As of writing, US stock index futures were virtually unchanged on a daily basis, pointing to a cautious stance.

If US stocks retrace Monday's advance after the opening bell, the USD could hold its ground and make it difficult for GBP/USD to stretch higher.

Nevertheless, investors could opt to stay on the sidelines while waiting for key macroeconomic events of the week. The Federal Reserve and the Bank of England will announce monetary policy decisions on Wednesday and Thursday, respectively. The US economic docket will also feature ADP employment Change, JOLTS Job Openings and ISM Manufacturing PMI data on Wednesday.

GBP/USD Technical Analysis

GBP/USD faces immediate resistance at 1.2175, where the 100-period Simple Moving Average (SMA) on the 4-hour chart is located. If the pair rises above that level, 1.2200 (Fibonacci 23.6% retracement of the latest downtrend, 200-period SMA) could be seen as next resistance before 1.2260 (static level).

On the downside, 1.2140 (50-period SMA) aligns as interim support before 1.2100. A 4-hour close below the latter could attract sellers and pave the way for an extended slide toward 1.2075 (static level) and 1.2050 (end-point of the latest downtrend).

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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.

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