GBPUSD staged an upward correction throughout Asian trading hours on Friday and proceeded to move higher towards 1.2000. To lure buyers and continue its comeback, the pair must convert that level into support. The benchmark 10-year US Treasury bond yield soared to its highest level since early November over 4% as data from the US indicated on Thursday that Unit Labor Costs grew by 3.2% in the fourth quarter, providing a lift to the US Dollar.
Nevertheless, in the late American session, Atlanta Fed President Raphael Bostic’s cautionary comments on policy tightening improved market sentiment and reduced the USD’s upward potential, helping GBPUSD to find support Bostic expressed his support for a 25 percent increase. and stated that they may be able to halt the tightening cycle by mid-to-late summer. Bostic will return later in the day.
Focus is on Fed speak and the February ISM Services PMI data from the United States.
Richmond Fed President Thomas Barkin and Federal Reserve Governor Michelle Bowman are also slated to speak. If these officials reject the possibility of a 50-basis point rate hike at the next policy meeting, the USD may remain under pressure ahead of the weekend.
The ISM Services PMI report will be included on the US economic docket. The Fed is concerned about wage growth flowing into strong service-sector inflation. As a result, market players will be paying particular attention to the survey’s inflation component, the Prices Paid sub-index Prices increased in February. The Paid Index is expected to fall to 64.5 from 67.8 in January. Such a reading would indicate that input inflation continues to climb, but at a somewhat slower rate than in January. If this component comes in close or above the January print, the USD may gain strength in response, and vice versa. It’s also worth mentioning that if the headline ISM Services PMI falls suddenly below 50, recession worries might dominate market action, making it harder for the USD to find demand.
Meanwhile, DUP leader Sir Jeffrey Donaldson said the choice on whether to embrace British Prime Minister Rishi Sunak’s revised Brexit accord will be “collective”. Numerous news sites claimed that the DUP will likely take two weeks to form. The uncertainty surrounding the proposed Northern Ireland according plan may prompt investors to avoid investing on the Pound Sterling’s long-term strength.
GBPUSD Technical Analysis
The downward trend line from early February, backed by the four-hour chart’s 20-period Simple Moving Average (SMA), forms firm resistance around about 1.2000.
After the pair has stabilized above that level, it may aim for 1.2050 (Fibonacci 23.6% retracement of the most recent downturn, 100-period SMA) and 1.2100.
On the downside, 1.1960 (100-day SMA) serves as critical support prior to 1.1940. A daily closure below this level may entice sellers and set off a downward leg towards 1.1900 and 1.1840.
