GBP/USD is currently in a consolidation phase slightly above 1.3100 on Wednesday, indicating a lack of strong recovery momentum in the technical outlook. The pair faced pressure as the risk-averse market environment could potentially limit its upside potential.
After dropping to its lowest level in over a week below 1.3100 on Tuesday, GBP/USD managed to close the day above this key level. In the European session on Wednesday, the pair is trading marginally higher as investors await the next catalyst to drive market direction.
The US Dollar (USD) remained steady following the release of ISM Manufacturing PMI data on Tuesday, which showed a slight improvement to 47.2 in August from 46.8 in July. The prevailing risk-averse sentiment in the market, as evidenced by the significant decline in Wall Street’s main indexes, supported the USD and pushed GBP/USD lower.
Looking ahead, investors will closely monitor the JOLTS Job Openings data for July, with expectations set at 8.1 million job openings. A figure above 8.5 million could boost confidence in the labor market and strengthen the USD, while a lower-than-expected reading may lead to a USD weakness and potential GBP/USD upside movement.
GBP/USD Technical Analysis
The Relative Strength Index (RSI) indicator for GBP/USD has recovered above 40 after dipping close to 30 on Tuesday, indicating a pause in selling pressure. The pair is currently trading near 1.3130, where the Fibonacci 23.6% retracement level of the latest uptrend intersects with the 20-period Simple Moving Average (SMA) on the 4-hour chart.
If GBP/USD manages to hold above this level, the next resistance levels to watch are at 1.3170 (50-period SMA) and 1.3200 (psychological level, static level). On the downside, initial support is at 1.3100 (psychological level, static level), followed by 1.3060 (100-period SMA) and 1.3040 (Fibonacci 38.2% retracement).
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world, dating back to 886 AD, and serves as the official currency of the United Kingdom. It accounts for 12% of all foreign exchange transactions globally, with key trading pairs including GBP/USD, GBP/JPY, and EUR/GBP. The value of the Pound Sterling is influenced by factors such as monetary policy decisions by the Bank of England, economic data releases, and trade balance indicators.
Understanding the dynamics of GBP and its interactions with other major currencies can provide valuable insights for investors and traders looking to navigate the forex market effectively.