GBP/USD Forecast: Technical outlook favors bears despite Wednesday's rebound

GBP/USD has reversed its direction following Wednesday's rebound.
Near-term technical outlook points to a slightly bearish bias.
FOMC Chairman Powell will testify before US Senate Banking Committee later in the day.

Eren Sengezer FXStreet

The British pound has capitalized on risk flows late Wednesday and the GBP/USD has managed to close in the positive territory. The souring market mood on Thursday is not allowing the pair to build on Wednesday's gains and the technical outlook shows that buyers are struggling to retain control of the action.

FOMC Chairman Jerome Powell's hawkish remarks on the Fed's policy outlook during the American trading hours on Wednesday helped the greenback preserve its strength against its major rivals. Powell left the door open for a 50 basis points rate hike in the near future if the initial series of rate increases fail to help them battle inflation. Regarding the Russia-Ukraine war, Powell noted that the impact on the US economy was expected to be small but acknowledged it was also creating uncertainty on the outlook.

Reports of Russia planning to discuss a ceasefire with Ukraine in the second round of talks provided a boost to risk sentiment and allowed GBP/USD to stage a decisive rebound late Wednesday.

Markets, however, remain sceptical about Russia's willingness to find a diplomatic solution to the conflict. Russian forces reportedly continue to move towards Kyiv while controlling several cities. Additionally, Russian foreign minister Lavrov reiterated that they could not allow a military threat from Ukraine to Russia. "We are ready for a dialogue based on mutual respect," Lavrov added but the markets remain risk-averse. As of writing, the UK's FTSE 100 Index was down 0.4% and US stock index futures were losing between 0.2% and 0.4%.

Later in the session, Powell will speak before the US Senate Banking Committee. Investors will keep a close eye on his remarks on the policy outlook but the market mood is likely to drive the pair's action.

GBP/USD Technical Analysis

The static resistance that seems to have formed at 1.3430 stays intact and buyers are unlikely to show interest in the pair unless it manages to flip that level into support. On the downside, interim support is located at 1.3350 ahead of 1.3300 (psychological level) and 1.3270 (static level). A daily close below the latter could be taken as a strong bearish sign and open the door for an extended slide toward 1.3200 (psychological level).

On the flip side, 1.3450 (50-period SMA on the four-hour chart) and 1.3500 (psychological level, 100-period SMA, 200-period SMA) align as next hurdles above 1.3430.

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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