GBP/USD Forecast: Technicals reveal lack of recovery momentum
- GBP/USD has struggled to extend rebound beyond 1.3050.
- Risk-averse market environment caps the pair's upside on Tuesday.
- Sellers could take action in case pound drops below 1.3000.
GBP/USD has staged a rebound after having tested 1.3000 support but has struggled to preserve its bullish momentum. The pair clings to modest daily gains below 1.3050 in the early European session but the negative shift witnessed in market mood is making it difficult for the British pound to continue to gather strength against the greenback.
Late Monday, the Ukrainian presidential adviser said that they were hoping to reach a peace deal with Russia by May at the latest. Although this development revived hopes for a de-escalation of the conflict, the adviser noted early Tuesday that there would either be an agreement or Russia would "go on the offensive."
Additionally, newly imposed lockdowns in China due to the surging number of coronavirus cases revived fears over supply chain bottlenecks, further weighing on the market mood. Reflecting the risk-averse atmosphere, the UK's FTSE 100 Index is losing more than 1% on Tuesday and the S&P Futures are down 0.5%.
On the flip side, the greenback stays on the back foot amid falling US Treasury bond yields, helping GBP/USD to stay afloat in positive territory.
Earlier in the day, data from the UK showed that the ILO Unemployment Rate declined to 3.9% in three months to January from 4.1% but this print failed to trigger a noticeable market reaction.
The US economic docket will feature February Producer Price Index (PPI) on Tuesday. Nevertheless, the risk perception is likely to continue to impact the pair's action in the near term.
GBP/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the four-hour chart stays near 40 and GBP/USD continues to trade below the 20-period SMA, suggesting that buyers are yet to control the pair's action.
1.3000 (psychological level, static level) aligns as significant support and additional losses toward 1.2920 (static level) could be witnessed in case this level breaks and turns into resistance.
Resistances are located at 1.3050 (static level, 20-period SMA), 1.3100 (psychological level, static level) and 1.3150 (static level, 50-period SMA).
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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.
