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The GBP/USD pair is showing a slight increase, trading above the round level of 1.3200, which was the low on June 29 and has also become the September low. However, the current fundamental situation supports the bears, requiring caution from the bulls.
According to CME Group's FedWatch tool, traders are pricing in a probability of more than 65% of another Fed rate hike in October, following the 25-basis-point hike in September.
Additional concerns about inflation caused by rising oil prices are reinforcing expectations of further monetary policy tightening by the Fed and continuing to push U.S. Treasury yields toward multi-year highs. This, in turn, strengthens the positive outlook for the U.S. currency and raises doubts about the sustainability of GBP/USD during attempts to rise.
For additional signals regarding the future course of the Bank of England's monetary policy, it is worth waiting for the scheduled speech by Bank of England Governor Andrew Bailey. His remarks will affect the dynamics of GBP/USD and the British pound.
During the North American session, attention will need to be paid to U.S. macroeconomic data, including durable goods orders and the revised University of Michigan Consumer Sentiment Index. In addition, comments from key members of the Federal Open Market Committee (FOMC) could affect the U.S. dollar and create new trading opportunities for GBP/USD.
From a technical perspective, GBP/USD remains below important moving averages, including the 200-day simple moving average (SMA), indicating that any attempts by the pair to rise are likely to remain limited while bearish sentiment dominates the market. The SMA at 1.3452 represents a key barrier that the bulls need to overcome to ease the current selling pressure. However, the nearest resistance is at 1.3260.
If the pair declines, a break below 1.3200 would open the way toward the current-year low of around 1.3160, set in June. Further selling would provide a strong signal for the bears and could lead to a further decline in the exchange rate in the short term.
The oscillators are negative, confirming the bears' advantage. However, the Relative Strength Index (RSI) is in oversold territory, indicating the possibility of a correction. The table below shows the percentage change in the U.S. dollar exchange rate against key currencies this week. The U.S. dollar recorded its largest appreciation against the Australian dollar.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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