GBP/USD Price Analysis: More downside seems warranted amid a breakdown below 1.2400
- GBP/USD has delivered a breakdown below 1.2400 as investors get hopeful for a hawkish Fed policy post robust US NFP.
- Considering the persistence of UK inflation, the BoE might fail to halve inflation by year-end as promised by UK PM Rishi Sunak.
- GBP/USD witnessed intense selling pressure after failing to surpass the 61.8% Fibo retracement at 1.2583.
The GBP/USD pair has slipped sharply below the round-level support of 1.2400 in the European session. The Cable is facing immense selling pressure as the US Dollar has been strengthened after robust payroll additions in the United States in May fetched interest rate hike bets into the picture.
Additions of fresh Employment in May were extremely solid despite the Federal Reserve (Fed) consistently raising interest rates and US regional banks have inculcated more filters into their credit disbursement mechanism to maintain their asset quality amid a turbulent environment.
The Pound Sterling is failing in holding its feet despite the Bank of England (BoE) being expected to raise interest rates further amid a tight labor market and persistent food inflation. Considering the persistence in United Kingdom inflation, BoE Governor Andrew Bailey might fail to halve inflation by year-end as promised by UK Prime Minister Rishi Sunak.
GBP/USD witnessed intense selling pressure after failing to surpass the 61.8% Fibonacci retracement (plotted from May 10 high at 1.2680 to May 25 low at 1.2308) at 1.2583. At the press time, the Cable dropped below the 23.6% Fibo retracement at around 1.2400. The asset has also surrendered the support from the upward-sloping trendline placed from May 25 low at 1.2308.
The Relative Strength Index (RSI) (14) is hovering near 40.00. A breakdown below the same would activate the bearish momentum.
Should the asset break below May 31 low at 1.2348, US Dollar bulls would drag the asset toward May 25 low at 1.2308. Slippage below the latter would expose the asset to April 03 low at 1.2275.
On the flip side, a confident break above May 16 high at 1.2547 will drive the Cable towards May 10 low at 1.2603 followed by May 10 high at 1.2680.
GBP/USD four-hour chart
Author
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
