- GBP/USD lacks any firm directional bias and oscillates in a narrow trading band on Friday.
- A modest USD downtick lends some support, though recession fears keep a lid on the major.
- The mixed technical setup further warrants caution for aggressive traders ahead of UK data.
The GBP/USD pair struggles to gain any meaningful traction on Friday and oscillates in a narrow range below a one-week high, around the 1.2785 region touched the previous day. Spot prices currently trade around mid-1.2700s, nearly unchanged for the day and holding steady around the 23.6% Fibonacci retracement level of the recent downfall from a 15-month peak touched in July.
Retreating US Treasury bond yields drags the US Dollar (USD) away from its highest level in more than two months, which, in turn, acts as a tailwind for the GBP/USD pair. Apart from this, rising bets for further interest rate hikes by the Bank of England (BoE) underpins the British Pound (GBP) and lend some support to the major. That said, growing acceptance that the Federal Reserve (Fed) will keep rates higher for longer, along with looming recession risks, helps limit the downside for the safe-haven buck and keeps a lid on any further gains for the pair.
From a technical perspective, the GBP/USD pair, so far, has been struggling to find acceptance or build on the momentum beyond the 100-period Simple Moving Average (SMA) on the 4-hour chart. Adding to this, oscillators on the daily chart, though have recovered from the bearish territory, are yet to confirm a positive bias. This, in turn, warrants some caution before positioning for an extension of the recent modest recovery move from the 100-day SMA support, around the 1.2615 region, or the lowest level since June 30 touched earlier this week.
In the meantime, any subsequent move-up is more likely to confront resistance near the overnight swing high, around the 1.2765 region, ahead of the 1.2800 mark and the 1.2820 confluence. The latter comprises the 200-period SMA on the 4-hour chart and the 38.2% Fibo. level, which if cleared decisively will set the stage for some meaningful appreciating move. The GBP/USD pair might aim to surpass an intermediate hurdle near the mid-1.2800s and climb further towards the 50% Fibo. level, around the 1.2875-1.2880 region, en route to the 1.2900 round figure.
On the flip side, the overnight swing low, around the 1.2700 mark, now seems to protect the immediate downside, below which spot prices could slide back to challenge the 100-day SMA, currently around the 1.2625 region. A convincing break below will be seen as a fresh trigger for bearish traders and expose the 1.2500 psychological mark, with some intermediate support near the 1.2530-1.2525 horizontal zone. The corrective decline could get extended towards the 1.2440-1.2435 support before spot prices eventually drop to the 1.2400 round figure.
GBP/USD 4-hour chart
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Technical levels to watch
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