GBP/USD Pair Sees Modest Uptick Amidst Consolidation and Cautious Sentiments
During the Asian session on Friday, the GBP/USD pair showed a slight increase, moving away from the previous day's one-and-a-half-week low in the 1.2840-1.2835 region.
During the Asian session on Friday, the GBP/USD pair showed a slight increase, moving away from the previous day’s one-and-a-half-week low in the 1.2840-1.2835 region. As of now, spot prices are trading near 1.2880, reflecting a modest 0.10% gain for the day.
The US Dollar (USD) is in a consolidation phase following an overnight surge to over a one-week high, which is providing some support to the GBP/USD pair. However, the USD’s downside appears limited due to optimistic US macro data released on Thursday, indicating strength in the US labor market and reinforcing expectations for further policy tightening by the Federal Reserve (Fed). Investors remain uncertain about whether the Fed will adopt a more dovish policy stance or stick to its forecast of a 50 bps rate hike by the year’s end.
The focus now turns to the highly-anticipated FOMC policy decision set to be announced next Wednesday. In the meantime, a softer risk sentiment could continue to boost the safe-haven appeal of the Greenback. On the other hand, the British Pound (GBP) may continue to underperform, influenced by softer UK consumer inflation figures released this week, which could ease pressure on the Bank of England (BoE) to pursue more aggressive interest rate hikes. This might deter traders from positioning for significant appreciation in the GBP/USD pair.
From a technical perspective, spot prices are displaying resilience below the 100-period Simple Moving Average (SMA) on the 4-hour chart and have managed to move back above the 50% Fibonacci retracement level of the June-July rally. The recent pullback from the 1.3140 area, the highest level since April 2022, seems to have stalled for now. However, any potential upward move may face strong resistance near the 1.2900 round-figure mark and could quickly lose momentum around the 38.2% Fibo. level in the 1.2930-1.2935 region.
Positive oscillators on the daily chart indicate some strength, and if the pair sustains movement beyond the mentioned resistance, it may suggest that the corrective decline has concluded, opening the path for additional gains. In this scenario, the GBP/USD pair could potentially gather momentum towards reclaiming the 1.3000 psychological mark, which aligns with the 23.6% Fibo. level, becoming a crucial pivot point. Thus, further buying could shift the near-term bias in favor of bullish traders.
On the contrary, the immediate downside is protected by the 100-period SMA on the 4-hour chart, currently near the 1.2855-1.2850 region. A convincing break below this level might expose the 61.8% Fibo. level around 1.2800, potentially leading the pair to accelerate its decline towards the next relevant support near the 1.2750-1.2745 zone, on its way to the 1.2700 round figure and the 1.2685-1.2680 region.
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