- GBP/USD finds support near 1.3700 amid risk-off mood.
- BOE hints at a potential rate hike, Brexit and Evergrande concerns loom.
- Technical setup points to more weakness ahead.
GBP/USD is fading the impressive rebound staged from the pivotal support, as it posts small losses this Friday.
At the time of writing, the cable is trading at 1.3733, down 0.06% on the day, hurt by the return of the risk-off trades, as uncertainty over the repayment of China Evergrande Group’s debt over the next month sags investors’ confidence.
Moreover, the US dollar attempts a bounce after the previous sharp declines, collaborating with the pullback in the spot. Adding to this, persistent Brexit concerns continue to limit the pound’s upside attempts.
In the latest Brexit update, the European Union (EU) fears that its citizens will be barred from flights to the UK due to the complex residency rules.
GBP/USD rallied hard on Thursday and tested the 1.3750 psychological barrier after the Bank of England (BOE) hinted at a growing case for rate lift-off as inflation will stay higher for a longer period. The UK central bank, however, kept its monetary policy settings unadjusted.
Attention now turns towards the UK CBI Realized Sales and Fed Chair Jerome Powell’s speech for fresh trading incentives.
GBP/USD: Technical outlook
Having faced rejection at 1.3750, GBP/USD has turned south but the bulls have managed to find support at 1.3700.
If the bulls regain poise, then a fresh advance towards the horizontal 21-Daily Moving Average (DMA) at 1.3772. However, the bulls will first need to clear Thursday’s high.
The 14-day Relative Strength Index (RSI) has turned flat below the midline, suggesting that the downside momentum could resume going forward.
A breach of the daily lows at 1.3697 could reinforce the bearish interests, opening floors towards the critical daily support line near 1.3610.
GBP/USD: Daily chart
GBP/USD: Additional levels to consider
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