GBP/USD Looking Bearish After Reversing Back Down Quickly
GBP/USD was rejected by the 50 daily SMA yesterday, which shows that buyers are weak and sellers are still in charge
GBP/USD was displaying some bullish momentum on Tuesday after the strong data from the UK, but it is looking bearish again and has turned down and fell below 1.2100 yesterday. The short-term technical analysis is displaying bearish momentum in this pair pointing further to the downside, especially if the moving averages below are broken.
The manufacturing and service sectors returned to expansion with services PMI beating expectations, showing a jump to 53.3 points, compared to estimates of 49.2 points. This pair climbed higher to 1.2150 after the data from below 1.20, but buyers ran into the 50 SMA (yellow) on the daily chart above, which rejected the price and yesterday we saw a reversal lower.
The US FOMC minutes which were released in the evening showed that several FED members voted for a 50 bps hike, which is bullish for the USD and the decline picked up further pace. Before that, FED member Bullard commented on rates going to 5.35%, which added more bullish momentum to the USD. So, we are bearing on GBP/USD and will try to open sell signals on retraces higher.
FED’s Bullard on the Wires
- My projection has rates reaching 5.375%
- US economy is stronger than what we previously thought
- FED will have to go north of 5% to tame inflation
- We’ve got a little ways to go
- Still think we can get inflation down while maintaining a strong labor market
- Still in a low productivity growth regime
- FED should only slow down once it’s got to the terminal rate
- Markets may be the overpricing risk of recession in 2023
- I forecast moderately slow growth this year with inflation declining
- If it doesn’t then we will have to act
- That’s why FED needs to be sharp now and get inflation under control this year
- This is the age of forward guidance, so economic lags arguments make less sense now
GBP/USD Live Chart
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