Market news
18.08.2022, 09:02

GBP/USD rebounds weakly from monthly low, shows some resilience below 1.2000 mark

  • GBP/USD quickly reverses an intraday dip to sub-1.2000 levels, or a fresh monthly low.
  • Expectations for a gradual BoE rate hike and recession fears act as a headwind for sterling.
  • The USD holds steady near the monthly peak and further contributes to capping the pair.

The GBP/USD pair shows some resilience below the 1.2000 psychological mark and stages a goodish rebound from a fresh monthly low touched earlier this Thursday. The recovery momentum pushes spot prices closer to the daily high during the first half of the European session, though lacks bullish conviction.

The US dollar sticks to its modest intraday gains and is a key factor acting as a headwind for the GBP/USD pair. Despite signs of easing US inflation, market participants seem convinced that the Fed will stick to its policy tightening path. Moreover, the minutes of the July 26-27 FOMC meeting indicated that the US central bank would not consider pulling back on interest rate hikes until inflation came down substantially. The hawkish Fed expectations remain supportive of elevated US Treasury bond yields and continue to underpin the greenback.

Apart from this, the prevalent risk-off environment offers additional support to the safe-haven buck. Growing worries about a global economic slowdown continue to weigh on investors' sentiment, which is evident from a generally weaker tone around the equity markets. The British pound, on the other hand, might struggle to gain any meaningful traction amid speculations that an economic downturn might force the UK central bank to adopt a gradual approach to raising interest rates. This was reinforced by the previous day's sharp downfall despite the hotter-than-expected UK CPI report.

The price chart also paints a bearish picture for cable, with the 50-day SMA at around 1.2095 successfully capping gains throuhgout most of the summer. On the weekly chart a bearish death cross formation is the process of completing. The 50-week SMA has now slipped below the 200 WMA and bar a reversal into the end of the week will fix and confirm the cross. This suggests further downside pressure on the horizon from bears and the potential for more losses.  

The fundamental and technical backdrops thus seem tilted firmly in favour of bearish traders and support prospects for further losses. That said, repeated failures to find acceptance below the 1.2000 mark and the emergence of some dip-buying warrants caution. Hence, it would be prudent to wait for sustained weakness below the said handle before positioning for any further depreciating move. Market participants now look forward to the US economic docket - featuring the release of the Philly Fed Manufacturing Index, the usual Weekly Initial Jobless Claim and Existing Home Sales data.

Technical levels to watch

 

© 2000-2024. All rights reserved.

This site is managed by Teletrade D.J. LLC 2351 LLC 2022 (Euro House, Richmond Hill Road, Kingstown, VC0100, St. Vincent and the Grenadines).

The information on this website is for informational purposes only and does not constitute any investment advice.

The company does not serve or provide services to customers who are residents of the US, Canada, Iran, The Democratic People's Republic of Korea, Yemen and FATF blacklisted countries.

AML Website Summary

Risk Disclosure

Making transactions on financial markets with marginal financial instruments opens up wide possibilities and allows investors who are willing to take risks to earn high profits, carrying a potentially high risk of losses at the same time. Therefore you should responsibly approach the issue of choosing the appropriate investment strategy, taking the available resources into account, before starting trading.

Privacy Policy

Use of the information: full or partial use of materials from this website must always be referenced to TeleTrade as the source of information. Use of the materials on the Internet must be accompanied by a hyperlink to teletrade.org. Automatic import of materials and information from this website is prohibited.

Please contact our PR department if you have any questions or need assistance at pr@teletrade.global.

Bank
transfers
Feedback
Live Chat E-mail
Up
Choose your language / location