Bears keep the upper hand ahead of Jackson Hole
A broad-based US dollar recovery emerged as the main theme that smashed GBP/USD to its lowest level in a month near 1.1800. The pair surrendered over 300 pips in a massive sell-off fueled by recession fears and repricing of Fed tightening expectations. GBP traders now brace for another eventful week amid plenty of data points from both sides of the Atlantic. And also the much-awaited Fed’s Jackson Hole Symposium. In this article, we’ll detail GBPUSD Weekly Technical Forecast for Aug 22nd – 26th.
GBP/USD: What happened last week?
GBP/USD saw an extension of the previous week’s sell-off, triggered by bulls’ failure to find acceptance above critical resistance at the 1.2265 level. The currency pair gave away nearly 100 pips on the first trading day of the week to trade near mid-1.2000s, as risk-off flows dominated amid brewing US-Sino tensions and weak Chinese activity data. Risk-aversion at the start of the week set a perfect stage for the US dollar recovery while markets fully priced a 50 bps BoE rate hike in September.
GBP bulls, however, sprung up for life and briefly recaptured 1.2100 on Tuesday. Markets witnessed a positive shift in risk sentiment amid hopes for China’s pro-growth stimulus and eased the buying pressure around the safe-haven dollar. Additionally, mixed UK employment data and pre-Fed minutes positioning helped cable find some comfort. The UK’s official jobless rate stood unchanged at a 47-year low of 3.8% in June while the number of people claiming jobless benefits dropped by 10.5K in July when compared to -32K expectations. The country’s average weekly earnings, excluding bonuses, arrived at +4.7% 3Mo/YoY in June versus +4.3% last and +4.5% expected.
GBP/USD: Technical outlook
Despite the steep decline witnessed in the second half of the week, the Relative Strength Index (RSI) indicator on the daily chart holds above 30. This suggests there is more room on the downside before GBP/USD turns technically oversold. Additionally, the uptrend line that formed during the mid-July-mid-August recovery phase is now broken.
The 1.1760 level (July 14 low) aligns as immediate support in case buyers fail to defend 1.1800. Below 1.1760, 1.1700 (psychological level) could be seen as the next bearish target before 1.1650 (October 7, 2016, low).
On the upside, key resistance is located at 1.2000 (static level, psychological level). In case the pair manages to recover above that level and confirms it as support, next hurdles could be seen at 1.2100 (20-day SMA, 50-day SMA) and 1.2200 (broken trend line).
GBP/USD: Sentiment poll
Our Forecast Poll paints a mixed picture in the near term. The one-month outlook shows that most experts see the GBP staging a rebound with the average target around 1.1967.
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