• GBP/USD catches aggressive bids on Friday amid broad-based USD weakness.
  • The risk-on impulse prompts some long-unwinding around the safe-haven buck.
  • Aggressive Fed rate hike bets, the UK’s bleak economic outlook might cap gains.

The GBP/USD pair gains strong positive traction on Friday and continues scaling higher through the early part of the European session. The momentum lifts spot prices to a one-and-half-week high, closer to mid-1.1600s, and is sponsored by the heavily offered tone surrounding the US dollar.

A goodish recovery in the risk sentiment - as depicted by a positive tone around the equity markets - drags the safe-haven buck further away from a two-decade high touched earlier this week. In fact, the key USD Index, which measures the greenback's performance against a basket of currencies, dives to a fresh monthly low and turns out to be a key factor behind the GBP/USD pair’s intraday momentum to the upside.

The British pound, on the other hand, draws support from the new UK Prime Minister Liz Truss's plans to cap energy bills for the next two years, which is seen as a welcome development for households. That said, the worsening outlook for the UK economy might continue to act as a headwind for sterling. Apart from this, hawkish Fed expectations should limit the USD corrective slide and cap the GBP/USD pair.

The markets seem convinced that the Fed will stick to its aggressive policy tightening path to tame inflation and have been pricing in a greater chance of a 75 bps rate hike at the September meeting. The bets were reaffirmed by Fed Chair Jerome Powell's hawkish remarks on Thursday, which underpinned elevated US Treasury bond yields and support prospects for the emergence of some USD dip-buying.

Hence, it will be prudent to wait for strong follow-through buying before confirming that the GBP/USD pair has formed a near-term bottom around the 1.1400 mark and positioning for any further gains. In the absence of any major market-moving economic releases, speeches by Fed officials might influence the USD later during the early North American session and provide some impetus to the GBP/USD pair.

Technical levels to watch

GBP/USD

Overview
Today last price 1.1636
Today Daily Change 0.0131
Today Daily Change % 1.14
Today daily open 1.1505
 
Trends
Daily SMA20 1.1759
Daily SMA50 1.193
Daily SMA100 1.2172
Daily SMA200 1.2755
 
Levels
Previous Daily High 1.1561
Previous Daily Low 1.146
Previous Weekly High 1.1761
Previous Weekly Low 1.1496
Previous Monthly High 1.2294
Previous Monthly Low 1.1599
Daily Fibonacci 38.2% 1.1499
Daily Fibonacci 61.8% 1.1522
Daily Pivot Point S1 1.1456
Daily Pivot Point S2 1.1408
Daily Pivot Point S3 1.1356
Daily Pivot Point R1 1.1557
Daily Pivot Point R2 1.1609
Daily Pivot Point R3 1.1658

 

 

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