GBP/USD Holds Above 1.2250 Amid Market Volatility
GBP/USD made a significant jump of 100 pips on Monday, reaching its highest level in over a week at 1.2258. The pair is maintaining its upward momentum as the US Dollar weakens due to fluctuating bond yields. On Tuesday, the UK will release employment data, and the S&P Global PMI figures are also scheduled for publication.
The currency pair started trading higher after testing the 1.2100 level. However, the 4-hour Relative Strength Index (RSI) remains below 50, indicating the persisting bearish trend. If the pair closes below 1.2100 in the 4-hour chart, sellers might take action. In this scenario, 1.2050 (the recent low) could be the next downward target before reaching 1.2000 (a psychological level).
On the upside, the 20-day Simple Moving Average (SMA) forms dynamic resistance levels at 1.2150, followed by 1.2180 (SMA 100) and 1.2200 (23.6% Fibonacci retracement level of the recent downtrend). GBP/USD faced recent downward pressure, dropping to the 1.2100 area before modestly recovering during the European trading session. Short-term technical outlook suggests the bearish trend persists.
UK retail sales declined by 0.9% in September compared to the previous month, reported by the UK's Office for National Statistics last Friday. This data, weaker than the market forecast of a 0.1% decrease, weighed on the British Pound.
Meanwhile, Bank of England (BoE) Governor Andrew Bailey stated to Belfast Telegraph that he expects inflation to "noticeably reduce" next month. Assessing September's inflation data, "core inflation decreased slightly more than we expected, which is quite encouraging," Bailey added, creating challenges for GBP/USD's recovery momentum.
On Thursday, the US Dollar lost strength after Federal Reserve Chairman Jerome Powell mentioned significant tightening of financial conditions along with higher bond yields could impact policy. Despite Powell's cautious tone, the USD found footing on Friday due to increasing concerns about the escalation of the Israel-Hamas conflict. Investors tend to avoid risky assets on the final trading day of the week, allowing the USD to stand strong against its counterparts.
The currency pair started trading higher after testing the 1.2100 level. However, the 4-hour Relative Strength Index (RSI) remains below 50, indicating the persisting bearish trend. If the pair closes below 1.2100 in the 4-hour chart, sellers might take action. In this scenario, 1.2050 (the recent low) could be the next downward target before reaching 1.2000 (a psychological level).
On the upside, the 20-day Simple Moving Average (SMA) forms dynamic resistance levels at 1.2150, followed by 1.2180 (SMA 100) and 1.2200 (23.6% Fibonacci retracement level of the recent downtrend). GBP/USD faced recent downward pressure, dropping to the 1.2100 area before modestly recovering during the European trading session. Short-term technical outlook suggests the bearish trend persists.
UK retail sales declined by 0.9% in September compared to the previous month, reported by the UK's Office for National Statistics last Friday. This data, weaker than the market forecast of a 0.1% decrease, weighed on the British Pound.
Meanwhile, Bank of England (BoE) Governor Andrew Bailey stated to Belfast Telegraph that he expects inflation to "noticeably reduce" next month. Assessing September's inflation data, "core inflation decreased slightly more than we expected, which is quite encouraging," Bailey added, creating challenges for GBP/USD's recovery momentum.
On Thursday, the US Dollar lost strength after Federal Reserve Chairman Jerome Powell mentioned significant tightening of financial conditions along with higher bond yields could impact policy. Despite Powell's cautious tone, the USD found footing on Friday due to increasing concerns about the escalation of the Israel-Hamas conflict. Investors tend to avoid risky assets on the final trading day of the week, allowing the USD to stand strong against its counterparts.
