GBP/USD: Support at 1.2625 Under Pressure Again
Forex.com | Aug 25, 2023 02:49AM ET
- Strong US data has boosted the greenback ahead of Fed Chairman Powell’s highly-anticipated Jackson Hole speech tomorrow.
- GBP/USD is again testing support in the 1.2625 area, and a break of this level could signal another leg lower as we move into September.
- Near-term resistance sits up at 1.2800, the monthly high.
Currencies like the euro and the British pound were driven sharply lower after dismal PMI figures in European session trade before the US dollar got a dose of the same medicine in North American trade, reversing its previous strength.
Thankfully for dollar bulls, yesterday’s economic data has injected some optimism for the US economy. Initial unemployment claims printed at 230K, better than last week’s reading and the market’s expectations, while Core Durable Goods Orders rose 0.5% m/m, solidly above the 0.2% expected reading.
In brief, the US economy and labor market continue to exceed expectations ahead of Fed Chairman Powell’s highly-anticipated speech at the Jackson Hole Symposium. Traders don’t expect much in the way of hawkishness from Mr. Powell, with the market pricing in only 15% odds of a rate hike next month, per CME FedWatch. If Powell strikes a bit of a hawkish tone, those odds could rise, driving the greenback higher along with them.
h2 British Pound Technical Analysis/h2Source: TradingView, StoneX
Looking at the chart above, GBP/USD is once again testing key support in the 1.2625 area, where the 100-day EMA and 38.2% Fibonacci retracement of the March-July rally converge.
With little in the way of economic data on the calendar for the rest of the week and traders hyper-focused on the Fed Chairman Powell’s speech tomorrow, GBP/USD could see quieter trade over the next 24 hours, but if Powell comes out swinging, GBP/USD could break below that key support level ahead of the weekend, opening the door for another leg down toward the 50% Fibonacci retracement near 1.25 as we move through September.
Meanwhile, bulls will need to see a breakout above the August highs near 1.2800 to have confidence that the longer-term uptrend has resumed. Until we see a break one way or another, longer-term traders may want to sit on their hands and wait for clarity.
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