GBP/USD Sideways Trading – Why Could $1.2990 Lead an Uptrend?
After Tuesday’s meager recovery attempt, GBP/USD reversed course and struggled to shake off the downside pressure following the UK jobs report early on Tuesday. The pair is trading near 1.3000, and sellers may be interested if this level proves to be resistance.
The UK’s Office for National Statistics (ONS) reported that the ILO unemployment rate fell to 3.8% in February from 3.9% in January. According to the ONS, vacancies reached a new high of 1,288,000 from January to March 2022. Finally, as measured by the average hourly wage including bonus, annual wage inflation is expected to be 5.4% .
Despite the positive data, markets remain risk averse in the European session, making it difficult for the pound to find demand. The UK’s FTSE 100 index is down 0.7% today as Russia prepares to step up military aggression in eastern Ukraine and ongoing coronavirus-related lockdowns in China.
Later in the session, March inflation data from the US will be examined for further impetus. The consumer price index (CPI) is expected to rise from 7.9% in February to 8.5% in March. Investors are currently pricing in a 7.8% chance of 75 basis point (bp) rate hikes in the next two meetings.
In other words, the Fed is widely expected to opt for two 50 basis point hikes in the next two meetings. Nonetheless, a stronger than expected CPI reading could help the greenback maintain its strength while weighing on GBP/USD.
GBP/USD Technical Outlook
Since Friday, the GBP/USD pair has consolidated around 1.3000. A failed bullish attack on the 200-period exponential moving average (EMA) sparked a strong sell-off in the asset from its March 23 high of around 1.3300. Cable is auctioned in a tight range of 12982 to 1.3057 on a four-hour timescale. It should be noted that the asset is consolidating near its critical low, which is the March low at 1.3001.
A decent consolidation near the previous lower level, which is also a psychological figure, usually indicates the formation of a double bottom. A break below the consolidation, on the other hand, is a foregone conclusion, and the asset could embark on an extended bearish path. The trendline drawn from the March 23rd high at 1.3300 to the April 5th high at 1.3167 will be a major hurdle going forward.
The Pound bulls are also failing to clear the 20-EMA, which is currently trading at 1.3032. Meanwhile, the Relative Strength Index (RSI) (14) has moved into a bearish range from 20.00 to 40.00 indicating that the downtrend will continue.
A decisive drop below Friday’s low at 1.2982 will wake up the greenback bulls, dragging the asset down to the November 2, 2020 low at 1.2854, followed by round level support at 1.2800.
On the other hand, the Pound bulls may be able to dictate prices if the asset decisively breaks above the April 7 high at 1.3106. This will bring the pair closer to the April 4th high at 1.3137. If the latter is crossed, the asset will be drawn towards the resistance of the round level at 1.3200. Good luck!