GBP/USD Tests Key Levels Amid Dollar Dominance
Tuesday Market Overview:
On Tuesday, the US dollar received robust support from rising US Treasury yields, overshadowing other major currencies. The 10-year Treasury yield surged nearly 14 basis points to 4.479%, driven by expectations of a potential Donald Trump victory in the presidential election, which could lead to higher tariffs and increased government borrowing. Concurrently, the Japanese yen hit its lowest level since 1986. These dynamics put additional pressure on the GBP/USD pair.
Technical Analysis:
On the hourly chart, GBP/USD has faced selling pressure, breaking below its gently ascending channel and key moving averages, reaching the critical support at 1.26329. A break below this support, after a brief retracement to the 20-period moving average near the 1.26404 resistance, could trigger further downside movement. Sustained bearish momentum would target 1.26275, with the area between 1.26195 and 1.26132 as subsequent support levels.
Alternative Scenario:
The bearish scenario would be invalidated if buyers manage to break above the 1.26526 resistance level. This move would suggest a potential reversal or at least a significant correction in the downtrend.
Market Overview and Key Levels
Resistance Levels:
– Resistance 2: 1.26526
– Resistance 1: 1.26404
Current Price (at the time of analysis): 1.26355
Support Levels:
– Support 1: 1.26329
– Support 2: 1.26195
– Support 3: 1.26132
Impactful Events:
Several key economic events today could significantly impact the GBP/USD pair:
Eurozone Consumer Price Index (CPI) Report:
Scheduled for 12:00 GMT, the annual and monthly CPI figures for the Eurozone are crucial inflation indicators. Higher-than-expected CPI can strengthen the euro, potentially weakening the pound against the dollar. Conversely, lower-than-expected figures could weaken the euro, benefiting the GBP/USD pair.
Eurozone Unemployment Rate:
Also, at 12:00 GMT, the Eurozone’s May unemployment rate report will be released. A lower-than-expected rate suggests economic improvement, potentially strengthening the euro and pressuring GBP/USD. A higher rate could have the opposite effect.
ECB Speeches:
Several speeches by ECB officials, including De Guindos, Elderson, Schnabel, and Lagarde, are scheduled. Hawkish remarks could strengthen the euro, while dovish comments might weaken it, impacting GBP/USD accordingly.
Federal Reserve Chairman Jerome Powell’s Speech:
Jerome Powell is set to speak at 16:30 GMT. His comments on future US monetary policy and interest rates could cause significant dollar volatility. Hawkish comments could bolster the dollar, pressuring GBP/USD, while dovish remarks could weaken the dollar and support the pound.
Oscillators and Risk Warnings:
– RSI (Relative Strength Index): Bearish, indicating continued selling pressure.
– MACD (Moving Average Convergence Divergence): Bearish, supporting the downward trend.
– Moving Averages: Bearish, reflecting the current negative price action.
Conclusion:
GBP/USD is currently facing significant downward pressure amidst rising US Treasury yields and robust dollar support. A break below the critical support at 1.26329 could lead to further declines, targeting lower support levels at 1.26195 and 1.26132. However, if buyers manage to break above the 1.26526 resistance, it could invalidate the bearish scenario and suggest a potential reversal.
Traders should closely monitor today’s key economic events, particularly the Eurozone CPI and unemployment reports, ECB speeches, and Jerome Powell’s comments, as these will provide crucial insights into market sentiment and potential price movements. Staying attuned to these indicators and key technical levels will help investors navigate the current market environment more effectively.
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