GBP/USD Price Forecast – Why Could $1.2990 Drive Uptrend?
Skerdian Meta • 2 min read
Following a dip below 1.3000 earlier, GBP/USD has turned north and moved into positive territory in the European session on Tuesday. The pair is facing key resistance at 1.3050, and if sellers fail to defend that level, it could post additional recovery gains. In the absence of high-impact data from the United Kingdom, the dollar’s market valuation continues to drive GBP/USD movement on Tuesday. After rising above 101.00 during the Asian session, the US Dollar Index (DXY) appears to have settled near 100.80, where it closed on Monday.
It’s worth noting, however, that the benchmark 10-year US Treasury bond yield is still hovering around 3%, implying that the recent drop in the DXY is most likely a technical correction. St. Louis Fed President James Bullard argued at a virtual event hosted by the Council on Foreign Relations that a 75 basis point rate hike could be an option if needed, providing a boost to US yields.
If market sentiment improves in the second half of the day, the dollar may continue to fall against its peers. Nonetheless, US stock index futures were last seen losing between 0.2 percent and 0.4 percent on the day, while the UK’s FTSE 100 Index was down 0.6 percent, indicating a slight possibility of risk flows dominating the markets.
In short, unless the dollar faces persistent selling pressure on a risk rally, the pair’s recovery attempts are likely to remain technical in the near term. Later today, the US economic docket will include data on Housing Starts and Building Permits, which market participants likely ignore.
GBP/USD Technical Outlook
GBP/USD remains bounded in consolidation from 1.2971, with an intraday bias of neutral first. With the 1.3165 resistance intact, further decline is expected. On the downside, a break will resume the larger downtrend that began with 1.4248. The following target is a 61.8 percent projection of 1.3641 to 1.2999 from 1.3297 at 1.2900. On the upside, a strong break of 1.3165 will confirm a short-term bottom and shift the bias back to the upside for the 1.3297 resistance and beyond.
In the grand scheme of things, the rise from 1.1409 (2020 low) has ended at 1.4248. The drop from 1.4248 could still be a corrective move, or it could signal the beginning of a long-term downtrend. In either case, the price would fall further to the 61.8 percent retracement of 2.1161 to 1.1409 at 1.2493. A break of the 1.3748 resistance level is required to confirm the end of the fall from 1.4248, or the outlook will remain bearish. Good luck!