• GBP/USD witnessed heavy selling on Wednesday and dropped to a fresh weekly low.
  • Dovish BoE expectations, recession fears, Brexit woes undermined the British pound.
  • A goodish pickup in the USD demand further exerted downward pressure on the pair.
  • The downside seems cushioned as the focus remains on Fed Chair Powell’s testimony.

The GBP/USD pair refreshed its weekly low during the early part of the European session, albeit managing to find some support ahead of mid-1.2100s and recovering a few pips thereafter. The pair was last seen trading around the 1.2225-1.2230 region, still down nearly 0.40% for the day.

The US dollar regained positive traction amid growing market acceptance that the Fed would stick to its policy tightening path and raise interest rates at a faster pace to curb soaring inflation. In fact, the markets have been pricing in another 75 bps rate hike at the next FOMC meeting in July. This, along with a fresh wave of the global risk-aversion trade, boosted the safe-haven USD and exerted downward pressure on the GBP/USD pair.

The British pound was further weighed down by expectations that the Bank of England would adopt a more gradual approach to raising interest rates amid recession fears and the cost of living crisis. The market fears were further fueled by the latest UK consumer inflation data, showing that the headline CPI climbed to a new 40-year high of 9.1% in May. On a monthly basis, the gauge decelerated sharply from a 2.5% increase in April and rose 0.7%.

Apart from this, the UK-EU impasse over the Northern Ireland Protocol of the Brexit agreement further undermined sterling and contributed to the GBP/USD pair's intraday decline. Meanwhile, the global flight to safety triggered a modest pullback in the US Treasury bond yields and held back the USD bulls from placing aggressive bets. This, in turn, was seen as the only factor that assisted the pair to rebound around 65-70 pips from the daily low.

It, however, remains to be seen if the GBP/USD pair is able to capitalize on the intraday bounce as investors await Fed Chair Jerome Powell's testimony before the Senate Banking Committee. Market participants will look for fresh clues about the Fed's policy tightening path, which would play a key role in influencing the USD price dynamics. This, in turn, should assist traders to determine the next leg of a directional move for the GBP/USD pair.

Technical levels to watch

GBP/USD

Overview
Today last price 1.223
Today Daily Change -0.0043
Today Daily Change % -0.35
Today daily open 1.2273
 
Trends
Daily SMA20 1.2426
Daily SMA50 1.2531
Daily SMA100 1.2911
Daily SMA200 1.3214
 
Levels
Previous Daily High 1.2324
Previous Daily Low 1.2242
Previous Weekly High 1.2407
Previous Weekly Low 1.1934
Previous Monthly High 1.2667
Previous Monthly Low 1.2155
Daily Fibonacci 38.2% 1.2293
Daily Fibonacci 61.8% 1.2273
Daily Pivot Point S1 1.2235
Daily Pivot Point S2 1.2197
Daily Pivot Point S3 1.2152
Daily Pivot Point R1 1.2317
Daily Pivot Point R2 1.2362
Daily Pivot Point R3 1.24

 

 

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