- GBP/USD retreats a bit from a multi-month high, though lacks follow-through.
- The technical setup still favours bulls and supports prospects for further gains.
- A sustained break below the 200 DMA is needed to negate the positive outlook.
The GBP/USD pair reverses a mid-European session dip to the 1.2235-1.2230 area and remains well within the striking distance of its highest level since June 17 touched earlier this Monday.
The attempted intraday US Dollar recovery from over a five-month low lacks bullish conviction amid bets that the Fed will slow the pace of its policy tightening as soon as in December. This, in turn, is seen as a key factor lending support to the GBP/USD pair. That said, a bleak outlook for the UK economy acts as a headwind for the British Pound and keeps a lid on spot prices, at least for now.
From a technical perspective, the top end of over a two-month-old upward-sloping channel, currently around mid-1.2300s, continues to cap the upside for the GBP/USD pair. That said, last week's sustained move and acceptance above a technically significant 200-day Simple Moving Average (SMA) for the first time in 2022 supports prospects for an eventual breakout through the ascending channel.
That said, oscillators on the daily chart have moved on the verge of breaking into the overbought zone and warrant some caution. This makes it prudent to wait for some near-term consolidation or a modest pullback before positioning for the next leg up. Nevertheless, the bias still seems tilted firmly in favour of bullish traders and supports prospects for a further near-term appreciating move.
In the meantime, the daily low, around the 1.2235-1.2230 region, now seems to protect the immediate downside ahead of the 1.2200 round-figure mark. Any subsequent decline could still be seen as a buying opportunity and remain limited near the 1.2150 region (200-DMA). The latter should act as a pivotal point, which if broken decisively will negate the positive outlook for the GBP/USD pair.
GBP/USD daily chart
Key levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD holds hot Australian CPI-led gains above 0.6500
AUD/USD consolidates hot Australian CPI data-led strong gains above 0.6500 in early Europe on Wednesday. The Australian CPI rose 1% in QoQ in Q1 against the 0.8% forecast, providing extra legs to the Australian Dollar upside.
USD/JPY sticks to 34-year high near 154.90 as intervention risks loom
USD/JPY is sitting at a multi-decade high of 154.88 reached on Tuesday. Traders refrain from placing fresh bets on the pair as Japan's FX intervention risks loom. Broad US Dollar weakness also caps the upside in the major. US Durable Goods data are next on tap.
Gold price struggles to lure buyers amid positive risk tone, reduced Fed rate cut bets
Gold price lacks follow-through buying and is influenced by a combination of diverging forces. Easing geopolitical tensions continue to undermine demand for the safe-haven precious metal. Tuesday’s dismal US PMIs weigh on the USD and lend support ahead of the key US macro data.
Crypto community reacts as BRICS considers launching stablecoin for international trade settlement
BRICS is intensifying efforts to reduce its reliance on the US dollar after plans for its stablecoin effort surfaced online on Tuesday. Most people expect the stablecoin to be backed by gold, considering BRICS nations have been accumulating large holdings of the commodity.
US versus the Eurozone: Inflation divergence causes monetary desynchronization
Historically there is a very close correlation between changes in US Treasury yields and German Bund yields. This is relevant at the current juncture, considering that the recent hawkish twist in the tone of the Fed might continue to push US long-term interest rates higher and put upward pressure on bond yields in the Eurozone.