GBP/USD Sideways Trading – Why Could $1.2990 Drive Uptrend?
Following Tuesday's meager recovery attempt, GBP/USD reversed course and has struggled to shake off the bearish pressure following the UK
Following Tuesday’s meager recovery attempt, GBP/USD reversed course and has struggled to shake off the bearish pressure following the UK jobs report early Tuesday. The pair is trading near 1.3000, and sellers may be interested if this level proves to be resistance.
The Office for National Statistics (ONS) in the United Kingdom reported that the ILO Unemployment Rate fell to 3.8 percent in February from 3.9 percent in January. According to the ONS, job vacancies increased to a new high of 1,288,000 from January to March 2022. Finally, as measured by Average Hourly Earnings Including Bonus, annual wage inflation was expected to be 5.4 percent.
Despite the positive data, markets remain risk-averse in the European session, making it difficult for the pound to find demand. The UK’s FTSE 100 Index is down 0.7 percent today amid reports that Russia is preparing to escalate its military aggression in eastern Ukraine and ongoing coronavirus-related lockdowns in China.
Later in the session, March inflation data from the United States will be scrutinized for new impetus. The Consumer Price Index (CPI) is expected to rise from 7.9 percent in February to 8.5 percent in March. Investors are currently pricing in a 7.8 percent chance of 75 basis point (bps) rate hikes in the next two meetings.
In other words, the Fed is widely expected to opt for two 50-basis-point hikes in the next two meetings. Nonetheless, a stronger-than-expected CPI reading could help the greenback maintain its strength while weighing on GBP/USD.
GBP/USD Technical Outlook
Since Friday, the GBP/USD pair has been consolidating around 1.3000. A failed bullish attack at the 200-period Exponential Moving Average (EMA) triggered a sharp sell-off in the asset from its March 23 high of around 1.3300. The cable is auctioning in a narrow range of 12982-1.3057 on a four-hour scale. It is worth noting that the asset is consolidating near its critical bottom, which is the low of March at 1.3001.
A decent consolidation near the previous bottom level, which is also a psychological figure, usually indicates the formation of a double bottom. A break below the consolidation, on the other hand, is a foregone conclusion, and the asset could embark on a prolonged bearish trajectory. The trendline drawn from the March 23 high of 1.3300 to the April 5 high of 1.3167 will act as a major impediment going forward.
Pound bulls also fail to break through the 20-EMA, which is currently trading at 1.3032. Meanwhile, the Relative Strength Index (RSI) (14) has shifted into a bearish range of 20.00-40.00, indicating that the bearish trend will continue.
A decisive drop below Friday’s low of 1.2982 will rouse the greenback bulls, dragging the asset towards the November 2, 2020 low of 1.2854, followed by round level support at 1.2800.
On the other hand, pound bulls may be able to dictate prices if the asset decisively surpasses the April 7 high of 1.3106. This will drive the pair closer to the April 4 high of 1.3137. If the latter is breached, the asset will be driven towards the round level resistance at 1.3200. Good luck!
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