1.2020 serves as a crucial degree of support for the GBPUSD.
After a sudden increase on Friday, the GBPUSD has continued to rise and reached its highest point in two weeks above 1.2100 early on Monday. Nevertheless, the pair lost momentum and dropped back below 1.2100 throughout the European session.
Market investors will closely monitor global bond rates in the absence of high-impact data announcements. Despite the fact that the market had anticipated a 205,000 gain in nonfarm payrolls in February. Data from the US released on Friday indicated a 311,000 increase instead. Investors overlooked the positive employment data in the wake of Silicon Valley Bank’s (SVB) demise. And revised their expectations for the Federal Reserve’s upcoming policy move.
The short-term performance of US rates will determine the value of the US Dollar.
Financial conditions being negatively impacted by the US central bank’s aggressive policy tightening became clear this week. When SVB, a bank heavily used by start-up software companies, had a liquidity crisis. After the SVB drama, the likelihood of a 25-basis point (bps) rate increases at the forthcoming FOMC meeting increased to beyond 90% from approximately 20% earlier in the week. Meanwhile, the benchmark 10-year US T-bond yield has already decreased by more than 10%. And is now at about 3.5% after touching 4% on Thursday.
Later in the day, the Fed will have a previously meeting. According to sources, governors will likely consider steps to calm the markets. Including perhaps relaxing the requirements for banks to access its discount window.
The USD may remain weak, at least until US yields stop falling. If this happens. February inflation data released on Tuesday. Yet, a rise in rates should stifle the upward movement of GBPUSD.
GBPUSD Technical Outlook
The 200-period Simple Moving Average on the four-hour chart and a static level are aligned in the range of 1.2090/1.2100 where the GBPUSD price retreated.
If the pair continues to trade below that level in the near term, its downward correction may be extended towards 1.2050. (the static level) and 1.2020. (100-day SMA). If the latter is broken on a daily basis, this might be interpreted. As a strong negative development and encourage further sells.
On the plus side, if GBPUSD stabilizes above 1.2100, buyers could get interested. In such case, the next obstacle before 1.2200 is 1.2140 (static level, daily high).
