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GBP/USD back in negative territory, challenges key support

US dollar remains firm as US yields continue to rise.
GBP/USD unable to recover, challenges the 1.3050 area.
Risk aversion also weighs on GBP/USD, Dow Jones falls by 0.72%.

Matías Salord FXStreet

The GBP/USD reversed after hitting 1.3106, and during the American session printed a fresh daily low at 1.3051. It is testing the critical support of 1.3050, moving with a bearish bias amid a stronger US dollar across the board.

Greenback up, Treasuries down

More comments from Fed official, plus the recent FOMC minutes, point to a more aggressive policy. James Bullard, St. Louis Fed President, called on Thursday for more rapid rate hikes to curb inflation. Data released on Thursday, showed US initial jobless claims dropped more than expected to 166K, the lowest since 1968.

The DXY bounced and is back in positive ground for the day supported by higher US yields. The 10-year stands at 2.63% and the 30-year at 2.68%. Both reached new multi-year highs on Thursday. At the same time, the Dow Jones drops by 0.62% and the S&P 500 falls 0.47%.

Short-term outlook

Risks remain tilted to the downside for GBP/USD after begin unable to hold above 1.3100. The crucial area around 1.3050 is being challenged since Wednesday. A recovery above 1.3100 could alleviate the pressure and above 1.3180 the pound should gain momentum.

“Sterling remains heavy just below $1.31 after having an outside down day earlier this week. We still look for an eventual test of last month’s cycle low near $1.30. After that is the November 2020 low near $1.2855 and then the September 2020 low near $1.2675. Between the likely return of risk-off impulses and the even more hawkish Fed outlook for tightening, we believe the dollar uptrend remains intact”, wrote analysts at BBH.

Technical levels

GBP/USD

Overview
Today last price	1.3069
Today Daily Change	-0.0003
Today Daily Change %	-0.02
Today daily open	1.3072

Trends
Daily SMA20	1.3123
Daily SMA50	1.3323
Daily SMA100	1.3372
Daily SMA200	1.3549

Levels
Previous Daily High	1.3106
Previous Daily Low	1.3046
Previous Weekly High	1.319
Previous Weekly Low	1.3051
Previous Monthly High	1.3438
Previous Monthly Low	1.3
Daily Fibonacci 38.2%	1.3068
Daily Fibonacci 61.8%	1.3083
Daily Pivot Point S1	1.3043
Daily Pivot Point S2	1.3014
Daily Pivot Point S3	1.2983
Daily Pivot Point R1	1.3103
Daily Pivot Point R2	1.3134
Daily Pivot Point R3	1.3163

Author

Matías Salord

FXStreet

Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.

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GBP/USD back in negative territory, challenges key support