And its Gains Will Continue to F
The pain for the pound was the dollar’s gains and came as two-year US government bond yields neared their peak in early November.
- The GBP/USD exchange rate was on its way to achieving triple losses when it fell below the 1.20 psychological support level to test important levels of technical support on the charts in the last session of last week, as the new rise in US government bond yields led to More wind in the US dollar’s sails.
- The losses of the currency pair last week affected the support level at 1.1914, the lowest for the sterling/dollar pair in five weeks, and closed trading around the level of 1.2040.
The US dollar was broadly bought on Friday when the Russian ruble emerged as the only large and liquid currency to stay afloat against the dollar once the HK dollar was overlooked as it received support near the lower end of the trading range allowed by the US dollar peg.
Sterling was far from the biggest loser but still gave up enough floor to put it in a position of weakness near early January lows below 1.19.
Commenting on the performance of the currency pair says Brad Bechtel, FX Analyst at Jefferies that “We’ve had new highs in the two-year yields and highs in the US dollar for this cycle/mini-correction that we’ve been calling for in both. We still believe that a correction in the 107/108 area of DXY is where we are headed,” the analyst added that the “GBP/USD is crossing through 200dma at the moment, and if we can clear 1.1902, we will be one of It is within 200dma/100dma in this pair and in some “clear air” on the charts. The next target for the currency pair might be support at 1.15.”
The pain for the pound was the dollar’s gains and came as two-year US government bond yields neared their peak in early November. Interest rates indicated by Fed Funds futures contracts hit new highs for September and October of this year.
Last Friday’s price action follows Bureau of Labor Statistics figures indicating that inflationary pressures began to build again within firms’ supply chains last month when PPI inflation resonated with its CPI counterparts on a sustained rise. The various January measures so far have asked whether a pre-inflationary process observed can be expected to lower US inflation much in the coming months, and the answer to that question is something that could have interest implications for the Fed’s rate outlook.
I still see that the movement of the GBP/USD currency pair around and below the psychological support level of 1.2000 will remain bearish. As I mentioned before, any gains for the GBP/USD will remain a target for selling, as the outlook remains bleak for the future of the recovery of the British economy, and in return economic performance the US dollar is stronger and still supports further tightening of US Federal Reserve policy.
The closest support levels for the current trend are 1.1975 and 1.1880, respectively. On the other hand, and according to the performance on the daily chart below, the resistance at 1.2275 will remain important for the bulls to rule or not.