GBP/USD Faces Downward Pressure Amid Strong USD and Upcoming Economic Releases

The GBP/USD currency pair is experiencing a downturn, retreating from its recent peak in the mid-1.2700s. Throughout Wednesday’s Asian trading hours, the pair has slipped beneath the significant 1.2700 mark and is approaching the 100-day Simple Moving Average (SMA) support zone, which is around 1.2620-1.2615. This level mirrors the lowest point seen since June 30.

A predominant factor for this downturn is the strengthened optimism around the US Dollar (USD). Anticipations that the Federal Reserve will maintain a hawkish position, fortified by recent robust US Retail Sales figures for July, have put downward pressures on the GBP/USD pair. The prevailing sentiment indicates that investors believe the US central bank will sustain higher interest rates for a more extended period.

However, a notable dip of 20 points in the Empire State Manufacturing Index for August, to a -19 reading, fuels speculations that the Federal Reserve might halt its rate-increasing activities in the imminent September meeting.

This could deter USD enthusiasts from taking new positions and might offer a semblance of support to GBP/USD. Market participants seem to be in a holding pattern, awaiting insights from the upcoming FOMC meeting minutes that could shed light on future interest rate decisions.

In the run-up to these pivotal releases, traders will be eyeing US economic data, specifically Building Permits, Housing Starts, and Industrial Production metrics. Concurrently, a surge in wage growth data, heightening concerns over lasting inflation, may prompt the Bank of England to contemplate further rate hikes, acting as a potential cushion against more significant losses for the GBP/USD pair. Traders should tread cautiously, considering these dynamics before making intraday moves.

Technical Overview:

GBP/USD remains below the 1.2725 threshold, with the EMA50 reinforcing this resistance level. A bearish trend is anticipated, with an initial target at the 1.2625 level. A breach here could further push the trend towards the 1.2505 region.

The persisting bearish outlook, backed by the double top pattern, is expected to hold unless there’s a breakthrough above 1.2725 and subsequently the 1.2825 levels. For the day, the trading range is projected between support at 1.2600 and resistance at 1.2750.

ABOUT THE AUTHOR See More

Arslan Butt

Index & Commodity Analyst

Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.

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