GBP/USD Forecast: Sellers could take action if 1.2700 support fails
- GBP/USD holds steady above 1.2700 following Tuesday's slide.
- Cautious market mood could limit the pair's upside in the near term.
- BoE Governor Bailey will testify before Treasury Committee.
GBP/USD edged lower and snapped a 4-day winning streak on Tuesday, pressured by the negative shift seen in risk sentiment. The pair holds steady above 1.2700 early Wednesday but the technical outlook doesn't yet point to a build-up of recovery momentum.
The US Dollar (USD) gathered strength on Tuesday as safe-haven flows dominated the action in financial markets in the American session. Investors are concerned that a prolonged conflict in the Middle East could ramp up energy prices and make it difficult for central banks to tame inflation.
Pound Sterling price this week
The table below shows the percentage change of Pound Sterling (GBP) against listed major currencies this week. Pound Sterling was the weakest against the Euro.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.07% | -0.05% | 0.08% | 0.14% | 0.11% | -0.06% | 0.14% | |
| EUR | 0.06% | 0.02% | 0.16% | 0.21% | 0.19% | 0.02% | 0.19% | |
| GBP | 0.06% | -0.02% | 0.14% | 0.20% | 0.17% | 0.00% | 0.19% | |
| CAD | -0.08% | -0.15% | -0.13% | 0.06% | 0.06% | -0.14% | 0.06% | |
| AUD | -0.14% | -0.20% | -0.19% | -0.06% | 0.00% | -0.20% | 0.00% | |
| JPY | -0.14% | -0.18% | -0.18% | -0.02% | 0.03% | -0.17% | 0.01% | |
| NZD | 0.06% | -0.02% | 0.01% | 0.14% | 0.20% | 0.18% | 0.19% | |
| CHF | -0.13% | -0.20% | -0.18% | -0.05% | 0.02% | -0.02% | -0.18% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Early Wednesday, the UK's FTSE 100 Index trades modestly lower and US stock index futures stay mixed, suggesting that markets remain cautious mid-week.
Later in the American session, Bank of England (BoE) Governor Andrew Bailey will testify before the Treasury Select Committee. Bailey will respond to questions regarding the threat to financial stability posed by high interest rates. Bailey is likely to defend the decision to tighten policy to battle inflation. Following the BoE's decision to leave the policy rate unchanged in December, Bailey said that they can not say that interest rates have peaked. In case Bailey leaves the door open to additional rate hikes, GBP/USD could stretch higher.
The 10-year US Treasury note auction will also take place later in the day. In case the high-yield comes in at or below 4%, the 10-year US yield could turn south and weigh on the USD.
GBP/USD Technical Analysis
GBP/USD edged higher after finding support near 1.2700. On the upside, 1.2750 (mid-point of the ascending regression channel) aligns as next resistance. Once the pair stabilizes above this level, 1.2800 (psychological level, static level) could be set as the next bullish target before 1.2820 (end-point of the latest uptrend).
In case GBP/USD drops below 1.2700 (100-period Simple Movig Average (SMA), psychological level) and starts using this level as resistance, technical sellers could take action. In this scenario, 1.2660-1.2650 (200-period SMA, Fibonacci 23.6% retracement of the latest uptrend) could act as next support.
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.
