• GBP/USD edged lower for the second successive day amid a pickup in the USD demand.
  • Hawkish Fed expectations and recession fears continued acting as a tailwind for the buck.
  • Mostly upbeat UK PMI prints extended support to sterling and limited losses for the pair.

The GBP/USD pair struggled to capitalize on the overnight solid bounce of around 100 pips from the weekly low and attracted some selling for the second successive day on Thursday. Spot prices dropped to the 1.2170-1.2165 area during the early part of the European session, albeit managed to rebound a few pips thereafter.

The US dollar was back in demand amid hawkish Fed expectations and drew additional support from the worsening global economic outlook, which, in turn, exerted downward pressure on the GBP/USD pair. The markets seem convinced that the Fed would stick to its policy tightening path to combat stubbornly high inflation and have been pricing in another 75 bps rate hike at the next FOMC meeting in July. The bets were reaffirmed by Fed Chair Jerome Powell on Wednesday, saying that the ongoing rate increases will be appropriate.

Furthermore, investors remain worried that a more aggressive move by major central banks to curb soaring inflation would pose challenges to the global economic recovery. Adding to this, the disappointing release of the flash Eurozone PMI prints for June further raised fears about a possible recession and further underpinned the greenback's safe-haven status. The anti-risk flow led to an extension of the recent decline in the US Treasury bond yields, which capped gains for the USD and extended some support to the GBP/USD pair.

Apart from this, mostly upbeat flash UK PMI prints assisted spot prices to recover near 50 pips from the daily low. It, however, remains to be seen if the GBP/USD pair is able to capitalize on the attempted recovery amid expectations that the Bank of England would opt for a more gradual approach toward raising interest rates. This, along with the UK-EU impasse over the Northern Ireland Protocol of the Brexit agreement, favours bearish traders and supports prospects for a further near-term depreciating move for the GBP/USD pair.

Market participants now look forward to the US economic docket, featuring the release of the usual Weekly Initial Jobless Claims and the flash PMI prints for June. Traders will further take cues from Fed Chair Jerome Powell's second day of testimony before the House Financial Services Committee. This, along with the US bond yields and the broader market risk sentiment, would influence the USD and provide some impetus to the GBP/USD pair.

Technical levels to watch

GBP/USD

Overview
Today last price 1.2214
Today Daily Change -0.0052
Today Daily Change % -0.42
Today daily open 1.2266
 
Trends
Daily SMA20 1.241
Daily SMA50 1.2514
Daily SMA100 1.2898
Daily SMA200 1.3206
 
Levels
Previous Daily High 1.2315
Previous Daily Low 1.2161
Previous Weekly High 1.2407
Previous Weekly Low 1.1934
Previous Monthly High 1.2667
Previous Monthly Low 1.2155
Daily Fibonacci 38.2% 1.222
Daily Fibonacci 61.8% 1.2256
Daily Pivot Point S1 1.218
Daily Pivot Point S2 1.2094
Daily Pivot Point S3 1.2026
Daily Pivot Point R1 1.2334
Daily Pivot Point R2 1.2401
Daily Pivot Point R3 1.2487

 

 

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