GBP/USD Price Analysis – May 17, 2023
Daily Price Outlook
The GBP/USD pair experienced significant selling pressure for the second consecutive day, leading to a resumption of the bearish trend during the first half of the European session. As a result, spot prices dropped to a three-week low around the 1.2420 level.
The British pound faced additional weakness on Tuesday due to disappointing UK monthly job data, raising expectations that the Bank of England (BoE) may need to limit interest rate hikes to control inflation. Coupled with continued USD buying, this added to the bearish pressure surrounding the GBP/USD pair and contributed to its significant intraday decline.
In contrast, the USD Index (DXY), which measures the value of the US dollar against a basket of currencies, reached a nearly two-month high driven by multiple factors. Hawkish comments from Cleveland Federal Reserve (Fed) President Loretta Mester signaled that the US central bank might maintain higher interest rates for an extended period.
Additionally, concerns about a global economic slowdown increased demand for the safe-haven dollar. The release of weaker Chinese macro data on Tuesday further fueled worries about the post-COVID recovery in the world's second-largest economy, amplifying concerns of an economic downturn.
Furthermore, uncertainty surrounding the US government's borrowing limit prompted some investors to seek refuge in the greenback. However, a slight rise in US equities futures and a decline in US Treasury bond yields could limit the strength of the USD.
Nevertheless, given the prevailing market conditions, the GBP/USD pair is expected to continue its downward trajectory. From a technical perspective, the recent break below the lower boundary of an ascending trend channel that lasted over a month favors bearish traders and increases the likelihood of a further near-term depreciation towards the next significant support level around 1.2375-1.2370.
GBP/USD – Technical Outlook
During the Asian session, the GBP/USD currency pair is currently trading at the 1.2470 level. On the two-hour timeframe, there is a significant resistance around the 1.2496 level. After failing to break above this resistance, selling pressure has pushed the pair lower.
The 50-day exponential moving average is providing a notable resistance around the 1.2485 level. On the downside, the GBP/USD pair is likely to find support near the 1.2440 level.
This support level is reinforced by a double bottom pattern, and a break below it has the potential to expose the pair towards the 1.2400 level. It is important to note that a double bottom pattern often leads to an upward movement.
Therefore, the current strategy is to target the 1.2440 level until a decisive break below occurs. Traders may consider closing their positions near the 1.2440 level.
Related:
* USD/JPY Price Analysis – May 17, 2023
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