Bears Dominate GBP/USD – Why Cable Could Trade Bearish Under $1.1970 - Forex News by FX Leaders
Bears Dominate GBP/USD - Why Cable Could Trade Bearish Under $1.1970

Bears Dominate GBP/USD – Why Cable Could Trade Bearish Under $1.1970

Posted Wednesday, July 6, 2022 by
Aiswarya Gopan • 2 min read

GBP/USD has lost traction and dropped below 1.2200 on Wednesday morning, under pressure from safe-haven flows and broad dollar strength. The GBP/USD pair was last observed trading within a hair’s breadth of the lower boundary of its two-week trading range, indicating that the British pound is at risk of incurring further losses.

The US Conference Board reported on Tuesday that consumer inflation expectations for the next 12 months surged to 8 percent in June from 7.5 percent in May. As a result of the initial reaction to this report, the major indexes on Wall Street fell sharply, and the dollar strengthened against its major rivals. According to the CME Group’s FedWatch Tool, the probability of another 75 basis point rate hike in July has increased to 87 percent.

In contrast, investors refrain from wagering on a pound recovery in the wake of the British government’s approval of a bill allowing them to unilaterally scrap portions of the post-Brexit trade agreement with the EU. In line with the risk-averse market sentiment, the FTSE 100 Index in the United Kingdom is down more than 0.5% during the European session.

GBP/USD

Governor Andrew Bailey of the Bank of England (BOE) and Chairman Jerome Powell of the Federal Open Market Committee (FOMC) will discuss the policy outlook at the European Central Bank’s (ECB) annual Forum on Central Banking later in the day. Powell and Bailey remain committed to combating inflation through a tighter monetary policy. However, the BOE acknowledged the risk of a recession in the British economy in 2023. In the interim, Powell remains optimistic that the Fed can avoid a recession and restore price stability.

If market participants believe the Fed will maintain its aggressive tightening stance longer than the BOE, the dollar will likely outperform the pound. A positive shift in risk sentiment, on the other hand, is likely to weaken the dollar in the afternoon.

GBP/USD Technical Outlook

The GBP/USD pair provided strong negative trades yesterday to reach our extended target of 1.1933, showing some bullish bias influenced by stochastic optimism to test the resistance line formed around 1.1980, and the price tried to remain below this level to keep the bearish trend dominant in the coming sessions, with 1.1860 as the next negative target.

As a result, we will continue to recommend a bearish trend for the foreseeable future, noting that a break of 1.1980 may cause the price to accomplish intraday gains and visit 1.2077 areas before attempting to decline again.

Today’s trading range is expected to be between 1.1880 support and 1.2040 resistance.

Today’s expected trend is bearish.

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