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.
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