The Pound/Dollar is continuing to fall ahead of the American session, and it is currently trading at 1.3600, which is its lowest level in a week.
Because of the broad-based Dollar surge resulting from risk aversion, the currency pair was forced to trade on the defensive on Tuesday.
Outlook On The Technical Front
GBP/USD CHART Source: Tradingview.com
The Pound/Dollar is moving underneath the rising regression channel that has been in place since December, indicating a bearish turn in the near term.
It is also reflected in the Relative Strength Index (RSI) on the four-hour graph, which went below 40 for the first moment in over two months on Tuesday, indicating a lack of buying interest.
The Fibonacci 23.6% retrace line of the one-month uptrend, which is located around 1.3600, provides solid support.
If a four-hour candle falls below that level, the pair might continue to fall towards 1.3560 (100-period simple moving average) and 1.3530 (Fibonacci 38.2% retracement).
A critical resistance level around 1.3680 is formed by the bottom limit of the ascending band and the 20-period simple moving average (SMA).
If the pair can recover inside that channel, it might aim for 1.3700 (psychological level) and 1.3725 (lower psychological level) (the middle line of the ascending band).
An Overview Of The Fundamentals
Despite a little recovery from Monday’s dip, the Pound has continued to fall, weighed down by fresh Dollar strength and the risk-averse market climate.
The technical picture indicates that buyers are remaining on the sidelines and that more losses might be seen if the pair falls below 1.3600 in the near term.
The steep increase in the rates on US Treasury bonds ahead of next week’s Federal Open Market Committee plenary session helped the Dollar find demand early on Tuesday.
Per the CME Group’s FedWatch Tool, markets are presently pricing in a greater than 90% possibility of a 25 basis point rate rise in March.
Following a surge to its greatest level in two years at 1.85% earlier in the day, the benchmark 10-year US Treasury bond yield is holding steady at or around 1.8%, maintaining its bullish momentum.
The FTSE 100 Index in the United Kingdom is down 0.9% so far today, a reflection of the deteriorating market environment.
Furthermore, the futures indices for US stocks are dropping between 0.55% and 1.5% per week. If safe-haven movements continue to control the money systems in the second half of the day, the risk-sensitive Pound may find it difficult to maintain its resistance against the Greenback.
Earlier in the day, the Office for National Statistics in the United Kingdom revealed that the International Labor Organization’s unemployment rate fell to 4.1% in November from 4.2% in October.
Annual pay inflation, as measured by average earnings including bonuses, was 4.2% in November, a decrease from 4.9% in October, according to the publication’s supporting statistics. Despite this, the market’s response to these numbers was rather mild.