GBPUSD SIGNAL 17-08-22 : GBPUSD surrenders modest intraday gains, steadies near 1.2100 ahead of FOMC minutes.


GBPUSD SIGNAL 17-08-22 : GBPUSD surrenders modest intraday gains, steadies near 1.2100 ahead of FOMC minutes.

  • GBP/USD struggles to capitalize on hotter-than-expected UK CPI-led modest intraday gains.
  • Hawkish Fed expectations continue to act as a tailwind for the USD and as a headwind for cable.
  • The downside seems cushioned as traders seem reluctant ahead of the key FOMC minutes.

The GBPUSD pair retreats a few pips from the early European session high and is currently placed near the lower end of its daily trading range, just below the 1.2100 mark.

GBPUSD SIGNAL : The British pound did get a minor boost after the UK Office for National Statistics reported that the headline CPI accelerated to the highest level since 1982 and rose 10.1% YoY in July. The reading was well above the 9.4% recorded in June and 9.8% estimated, lifting bets for another rate hike by the Bank of England. The GBP/USD pair, however, struggles to capitalize on the modest intraday uptick and meets with some selling in the vicinity of the 1.2200 round figure.

Growing recession fears might force the UK central bank to adopt a gradual approach to raising interest rates. This, along with the underlying bullish tone surrounding the US dollar, acts as a headwind for the GBP/USD pair. The USD is trading strong near the monthly peak touched the previous day and continues to draw support from expectations that the Fed will stick to its policy tightening path. Apart from this, a cautious market mood further underpins the safe-haven buck.

From a technical perspective the pair is looking fragile, having now broken below the 50 DMA at 1.2107 and as a rare death cross is seen in the process of forming on the weekly chart. This pattern occurs when the 50-week SMA crosses below the 200 WMA whilst both are declining, and it heralds lower prices to come. Whilst a bearish close this week will be required to confirm the formation of the death cross investors would do well to keep an eye on how price action evolves over the next few days. Still, bar a strong recovery in GBP/USD into the end of the week the pattern looks certain to play out. 

GBPUSD SIGNAL : Nothwithstanding all the bearish warning signs, USD bulls might refrain from placing aggressive bets and prefer to wait on the sidelines until after the highly-anticipated FOMC minutes, due later during the US session on Wednesday (today). Investors will no doubt parse the document for clues about the possibility of a 75 bps Fed rate hike move at the September policy meeting. This should influence the USD and provide a fresh directional impetus to the GBP/USD pair. In the meantime, the US Retail Sales figures might allow traders to grab short-term opportunities.

Hence, it would be prudent to wait for follow-through selling before confirming that the previous day’s bounce from the 1.2000 psychological mark or the monthly low has run out of steam. That said, bulls are likely to wait for sustained strength beyond the 1.2200 round-figure mark before positioning for any further near-term appreciating move for the GBP/USD pair.

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