- GBP/USD has struggled to gain traction after dropping below 1.3200.
- BoE's Mann says it's premature to talk about the timing of rate hikes.
- Dollar holds its ground as Fed's Powell double downs on hawkish outlook.
GBP/USD has returned to 1.3300 area after plunging to its weakest level in nearly a year below 1.3200 on Tuesday but the pair is likely to have a tough time gathering recovery momentum in the near term.
After struggling to find demand amid falling US Treasury bond yields earlier in the week, the greenback regained its footing on FOMC Chairman Jerome Powell's hawkish remarks.
Powell told the US Senate Banking Committee that they will discuss speeding up asset tapering in the upcoming policy meeting and noted that it was time to stop describing inflation as 'transitory.' Commenting on the new coronavirus variant, Powell said that it could hurt the economic recovery but sounded more worried about its impact on the inflation outlook.
Reflecting the renewed dollar strength, the US Dollar Index is staying in the positive territory above 96.00 in the European trading hours on Wednesday.
On the other hand, Bank of England Monetary Policy Committee member Catherine Mann argued that it was premature to talk about the timing or the size of rate hikes while reiterating that inflation expectations were still well-anchored.
Later in the day, Powell will testify before the House Committee on Financial Services. The November ADP Employment Change and the ISM Manufacturing PMI will be featured in the US economic docket as well.
Tuesday's market action confirmed, once again, that GBP/USD remains at the mercy of the dollar's market valuation and GBP/USD is expected to remain under bearish pressure unless the greenback faces a heavy selloff.
GBP/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the four-chart stays below 50, suggesting that sellers remain in control of the pair's action in the near term. Moreover, GBP/USD trades below the 20-period SMA on the same chart, confirming the bearish shift in the technical outlook.
On the downside, supports are located at 1.3240 (static level) and 1.3200 (psychological level, 2021 low).
1.3320 (20-period SMA) aligns as first resistance before 1.3360 (static level, 50-period SMA) and 1.3400 (psychological level, 50-period SMA).
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