The GBP/USD pair experiences a decline towards 1.2900 after significant losses on Thursday, driven by safe-haven flows dominating the financial markets during the European session on Friday. The near-term technical outlook suggests a bearish momentum is building up.
Analysis and Breakdown:
Following a negative close on Thursday, the GBP/USD pair continues to face bearish pressure, dropping below 1.2900 amid a shift towards safe-haven assets favoring the US Dollar. This movement is influenced by a negative risk sentiment in the market, leading to a stronger USD.
The latest data from the UK’s Office for National Statistics revealed a 1.2% decline in Retail Sales for June, compared to a 2.9% increase in May and below analysts’ expectations of -0.4%. This weaker-than-expected data further weighs on the Pound Sterling.
Looking ahead, with no major economic releases scheduled before the weekend, market sentiment and risk perception are likely to continue affecting the GBP/USD pair’s performance.
US stock index futures are currently down by 0.3% to 0.4%, while the UK’s FTSE 100 Index has declined by 0.6% on the day. Investors will be paying close attention to comments from Federal Reserve officials as the Fed blackout period approaches this Saturday. The market is pricing in a high probability of a 25 basis points rate cut in September, limiting the downside potential for the USD even if Fed officials signal support for a rate reduction.
In terms of technical analysis, the GBP/USD pair has broken below the lower limit of an ascending regression channel from early July, with the Relative Strength Index (RSI) on the 4-hour chart indicating bearish pressure. Immediate support levels are at 1.2900, followed by 1.2875 and 1.2820-1.2830, while resistance levels are at 1.2930, 1.2960, and 1.3000.
Overall, the current market conditions suggest a bearish outlook for the GBP/USD pair, driven by safe-haven flows, economic data releases, and Fed policy expectations. Traders and investors should closely monitor risk sentiment, key support and resistance levels, and upcoming Fed statements to gauge the future direction of the currency pair.