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GBP/USD sticks to modest intraday gains around mid-1.2200s, lacks follow-through

  • GBP/USD regains positive traction on Monday and recovers a part of Friday’s modest losses.
  • Rising US bond yields act as a tailwind for the USD and keep a lid on any meaningful upside.
  • Traders now look to BoE Governor Bailey’s scheduled speech for short-term opportunities.

The GBP/USD pair builds on Friday's late intraday rebound from sub-1.2200 levels and gains some positive traction on the first day of a new week. The pair maintains its bid tone through the early part of the European session and is currently trading around mid-1.2200s, up nearly 0.15% for the day.

A further recovery in the US Treasury bond yields is seen lending some support to the US Dollar (USD) and turning out to be a key factor acting as a headwind for the GBP/USD pair. That said, the Federal Reserve's signal that it might soon pause the rate-hiking cycle in the wake of the recent turmoil in the banking sector should cap any meaningful upside for the US bond yields. Apart from this, a generally positive risk tone - as depicted by a fresh leg up in the US equity futures - keeps a lid on any the safe-haven Greenback and remains supportive of the bid tone surrounding the major.

News that First Citizens Bank & Trust Company will buy all of Silicon Valley Bank's deposits and loans from the Federal Deposit Insurance Corporation (FDIC) calmed market nerves about the contagion risk and boost investors' confidence. Traders, however, remain worried about a full-blown banking crisis. In fact, International Monetary Fund (IMF) Chief Kristalina Georgieva warned over the weekend that risks to financial stability have increased. This, along with Russia's decision to shift nuclear weapons near Belarus, continues to keep a lid on any optimism in the markets.

In the absence of any relevant economic data, either from the UK or the US, the aforementioned mixed fundamental backdrop warrants some caution for aggressive traders and before placing fresh directional bets around the GBP/USD pair. That said, the Bank of England (BoE) Governor Andrew Bailey's scheduled speech later during the US session might influence the British Pound and provide some meaningful impetus to the major. Meanwhile, the focus will remain glued to the release of the US Core PCE Price Index - the Fed's preferred inflation gauge - due on Friday.

From a technical perspective the pair is rangebound in the short term, with a cieling likely to provide resistance at 1.2435 and a floor to give support at circa 1.1790. GBP/USD is currently in an upleg within the range. A break above the 1.2345 level will probably signal a continuation up to the cieling.

Alternatively a break below the 1.2175 swing low of March 21 would probably indicate the start of a downleg, potentially back all the way to the range floor. The trend prior to the formation of the sideways consolidation was bullish, indicating a slightly higher chance of a breakout higher. The Chaikin Money Flow oscillator is used by technical analysts to provide an insight into the likely direction for a range breakout, however, on GBP/USD it is giving mixed messages. 

Technical levels to watch

GBP/USD

Overview
Today last price1.2253
Today Daily Change0.0020
Today Daily Change %0.16
Today daily open1.2233
 
Trends
Daily SMA201.2085
Daily SMA501.2148
Daily SMA1001.2093
Daily SMA2001.1893
 
Levels
Previous Daily High1.2292
Previous Daily Low1.2191
Previous Weekly High1.2344
Previous Weekly Low1.2167
Previous Monthly High1.2402
Previous Monthly Low1.1915
Daily Fibonacci 38.2%1.223
Daily Fibonacci 61.8%1.2253
Daily Pivot Point S11.2185
Daily Pivot Point S21.2137
Daily Pivot Point S31.2083
Daily Pivot Point R11.2287
Daily Pivot Point R21.234
Daily Pivot Point R31.2388

Author

Haresh Menghani

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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GBP/USD sticks to modest intraday gains around mid-1.2200s, lacks follow-through