Yahoo Finance GBP/USD Daily Forecast – Sterling Fails to Hold Above 1.2500 Handle
Sterling Won’t be Support by Dovish Fed Speak this Week
If there is a dominant theme in the FX market it is that the British pound is weak and that the markets think the Fed will ease policy later this month.
The latter has been underpinning GBP/USD as it has put some pressure on the greenback. At the same time, Sterling is hovering near yearly lows versus the greenback and is the only major currency to do so.
Last week, several FOMC members revealed that they were on board with cutting rates next week. There was one notable exception. Fed member Rosengren said he’d rather wait, which sent the dollar sharply higher and also put pressure on equities.
As a result, GBP/USD is once again below the psychological 1.2500 handle.
Brexit developments have been weighing on the pair, and unless there is a shift in sentiment regarding the EU exit, we could see GBP/USD declining to fresh yearly lows.
The rationale behind this is that the Fed has now entered a blackout period. This means there won’t be headline news of Fed members discussing monetary policy which was a key driver for dollar weakness in the past week.
Technical Analysis
GBP/USD dipped below the 1.2400 handle last week but managed to rally and close the week near the 1.2500 handle. This has resulted in a bullish hammer print on a weekly chart.
The pattern shows a strong presence of buyers, although it is important to note that a weaker dollar heavily influenced buying.
In the early week, we are seeing strong downside pressure with a firm drop below the 1.2500 handle. Considering the momentum, I think that recovery rallies will be sold off at resistance found at 1.2486. Above that, further resistance is found at the psychosocial 1.2500 handle.
To the downside, I see support at 1.2453. This was the same level that held GBP/USD higher in the second week of the month.
Bottom Line
GBP/USD under pressure again as the dollar is lifted by Fed Rosengren’s comments from Friday.
Next level of interest to the downside falls at 1.2453.
Upside resistance for the session ahead is found at 1.2486 followed by 1.2500.
This article was originally posted on FX Empire
