- GBP/USD has turned south in the European session on Tuesday.
- The cautious market stance helps the US Dollar stay resilient against its rivals.
- Near-term technical outlook points to a lack of buyer interest.
GBP/USD has met renewed bearish pressure in the European morning and declined toward 1.2400 following a quiet Asian session. The negative shift seen in risk mood seems to be helping the US Dollar (USD) hold its ground and the pair could continue to react to changes in risk perception in the absence of high-tier data releases.
On Monday, the USD struggled to build on Friday's gains after a worse-than-expected ISM's Services PMI caused markets to lean toward a no change in the Federal Reserve's (Fed) policy rate in June.
The headline Services PMI declined to 50.3 in May from 51.9 in April. More importantly, the Prices Paid Index of the survey fell to 56.2 from 59.6 to highlight softer input inflation. Finally, the Employment Index dropped below 50, suggesting a contraction in the number of people employed in the service sector.
At the time of writing, the CME Group FedWatch Tool showed that markets are pricing a nearly 80% probability of the Fed keeping the policy rate steady in the 5-5.25% range at the June 13-14 policy meeting.
Meanwhile, the UK's FTSE 100 Index is down 0.3% in the early European session and US stock index futures are losing between 0.1% and 0.2%. In case safe-haven flows dominate the financial markets in the second half of the day, the USD should preserve its strength and weigh on the pair.
GBP/USD Technical Analysis
GBP/USD trades near 1.2400, where the ascending trend line and the 50-period Simple Moving Average (SMA) on the four-hour chart align. A four-hour close below that level could trigger an extended decline toward 1.2360 (static level) and 1.2320 (end-point of the latest downtrend).
On the upside, stiff resistance area seems to have formed at 1.2430/40 (100-period SMA, Fibonacci 38.2% retracement) before 1.2480 (200-period SMA, Fibonacci 50% retracement) and 1.2500 (psychological level).
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