GBP/USD Faces Heavy Bearish Pressure as BoE Governor’s Comments Spark Selloff
- GBP/USD falls toward 1.3100, hitting a three-week low.
- US Dollar strength keeps pair under pressure.
- Near-term technical outlook shows oversold conditions.
US Dollar Strength Drives GBP/USD Lower
GBP/USD experienced significant bearish pressure, dropping towards the 1.3100 level during the European morning on Thursday. The pair’s technical outlook suggests oversold conditions, but a strong correction may prove challenging.
The US Dollar’s strength played a key role in pushing GBP/USD lower on Wednesday, following the release of data by the Automatic Data Processing (ADP) that showed a private sector employment increase of 143,000, exceeding market expectations of 120,000.
BoE Governor’s Comments Trigger Pound Sterling Selloff
Bank of England Governor Andrew Bailey’s remarks in an interview with the Guardian newspaper caused a selloff in Pound Sterling during the early European session on Thursday. Bailey hinted at the potential for more aggressive rate cuts if inflation continues to improve, leading to broad GBP weakness.
As a result, the EUR/GBP pair surged by over 1% on the day, reflecting the impact of Bailey’s comments on the British currency.
Upcoming US Economic Data and Impact on GBP/USD
Later in the day, the US economic calendar will feature the weekly Initial Jobless Claims and the September ISM Services PMI data. Markets anticipate an increase in initial jobless claims to 220,000, which could further bolster the USD and weigh on GBP/USD.
If the ISM Services PMI falls below 50, concerns over a US economic slowdown may arise, making it challenging for the USD to outperform its peers and potentially affecting GBP/USD.
GBP/USD Technical Analysis
The Relative Strength Index (RSI) on the 4-hour chart indicates oversold conditions for GBP/USD, with potential for a technical correction. Key resistance levels include 1.3175 (Fibonacci 61.8% retracement) and 1.3200 (200-period SMA).
Support levels to watch for include 1.3100 (Fibonacci 78.6% retracement), 1.3050 (static level), and 1.3000 (static level).
Analysis
The GBP/USD pair is facing significant downward pressure due to a combination of US Dollar strength and comments from the Bank of England Governor. The technical outlook shows oversold conditions, but the pair may struggle to stage a meaningful correction amidst prevailing market dynamics.
Investors and traders should closely monitor upcoming US economic data releases, as they could further impact the pair’s performance. Additionally, key support and resistance levels provide guidance for potential trading opportunities.