GBPUSD is ready for 1.29!

Jan 4

Analyzing the movement of GBP/USD, we note its failure to capitalize on a modest recovery from the level near 1.2610, a nearly three-week low, as it fluctuated within a tight range during Thursday's Asian session. Currently, prices hover around the 1.2650 region, remaining largely unchanged for the day. The pressure stems from the widespread strength of the US dollar (USD), which has driven GBP/USD downward, reaching its lowest point since mid-December near 1.2610 on Tuesday. Although the pair recovered towards 1.2650 early on Wednesday, the technical outlook suggests that the bearish bias remains unchanged. The significant bounce in US Treasury yields has enabled the USD to outperform its major currency rivals on the first trading day of 2024. Additionally, the negative shift in risk sentiment, reflected by the decline in US stocks, has kept GBP/USD on the defensive. According to the CME Group FedWatch Tool, markets are currently pricing in a 75% probability that the Fed will cut policy rates by 25 basis points in March, indicating room for renewed USD weakness if the release adopts a dovish tone. In the post-meeting press conference, Fed Chair Jerome Powell stated that policymakers were contemplating and discussing the timing of a rate cut. Investors will seek to confirm whether officials have discussed the timing of a policy shift. In conclusion, GBP/USD appears to be under pressure due to the strength of the USD and negative risk sentiment. However, imminent events could influence the pair's movement, such as US macroeconomic data and Fed communications. Essentially, I anticipate a retest of a critical support/resistance level at 1.26 with a rise up to 1.29, or a break of the supply zone level between 1.2722-1.2770. Best wishes and happy trading to all from Nicola.