GBP/USD sticks to modest recovery gains above mid-1.1900s, upside potential seems limited

GBP/USD built on the overnight bounce from over a two-year low and edged higher on Thursday.
A positive risk tone prompted some profit-taking around the safe-haven USD and extended support.
The UK political crisis, Brexit woes should act as a headwind for the GBP and cap gains for the pair.

Haresh Menghani FXStreet

The GBP/USD pair gained some positive traction on Thursday and moved further away from its lowest level since March 2020, around the 1.1875 region touched the previous day. The pair maintained its bid tone through the early European session and was last seen trading near the daily high, just above the mid-1.1900s.

A slight improvement in global risk sentiment prompted some profit-taking by traders of the safe-haven US dollar, especially after the recent strong bullish run to a two-decade high. This, in turn, extended some support to the GBP/USD pair, though a combination of factors might hold back bulls from placing aggressive bets.

Recession fears remain the key theme and should keep a lid on any optimistic move in the markets. Apart from this, expectations for more aggressive Fed rate hikes should limit the USD pullback. Furthermore, domestic issues should act as a headwind for the British pound and contribute to capping the upside for the GBP/USD pair.

British Prime Minister Boris Johnson faces mounting pressure to step down following the resignations of key Tory MPs over the past few days. This comes amid worries that the UK government's controversial Northern Ireland Protocol Bill could trigger a trade war with the European Union amid the ongoing cost of living crisis.

Apart from this, expectations that the Bank of England would adopt a gradual approach towards raising interest rates supports prospects for the emergence of fresh selling around the GBP/USD pair. This makes it prudent to wait for strong follow-through buying before confirming that spot prices have formed a near-term bottom.

Market participants now look forward to the US Weekly Initial Jobless Claims, due later during the early North American session. This, along with Fed Governor Christopher Waller and St. Louis Fed President James Bullard's scheduled speeches, will influence the USD price dynamics and provide some impetus to the GBP/USD pair.

Technical levels to watch

GBP/USD

Overview
Today last price	1.1952
Today Daily Change	0.0024
Today Daily Change %	0.20
Today daily open	1.1928

Trends
Daily SMA20	1.2194
Daily SMA50	1.2362
Daily SMA100	1.2756
Daily SMA200	1.3131

Levels
Previous Daily High	1.199
Previous Daily Low	1.1876
Previous Weekly High	1.2332
Previous Weekly Low	1.1976
Previous Monthly High	1.2617
Previous Monthly Low	1.1934
Daily Fibonacci 38.2%	1.1919
Daily Fibonacci 61.8%	1.1946
Daily Pivot Point S1	1.1873
Daily Pivot Point S2	1.1818
Daily Pivot Point S3	1.176
Daily Pivot Point R1	1.1987
Daily Pivot Point R2	1.2045
Daily Pivot Point R3	1.21

Author

Haresh Menghani

FXStreet

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

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