British Pound seems vulnerable near two-month low as USD bulls eye US PCE and GDP
The GBP/USD pair enters a bearish consolidation phase during the Asian session on Wednesday, trading just above a two-month low, around the 1.3200 mark, touched the previous day. The fundamental backdrop suggests that the path of least resistance for spot prices remains to the downside, though bears opt to wait for important US macro releases before placing fresh bets.
The US Personal Consumption Expenditures (PCE) Price Index – the Federal Reserve's (Fed) preferred inflation gauge – will be published later today, along with the final Q2 GDP report. The crucial data will influence market expectations about the Fed policy path, which, in turn, will play a key role in driving the US Dollar (USD) and provide some meaningful impetus to the GBP/USD pair. In the meantime, the bullish USD undertone might continue to act as a headwind for the currency pair and keep a lid on any attempted recovery.
In fact, the USD Index (DXY), which tracks the Greenback against a basket of currencies, shot to a fresh high since July 28 on Tuesday amid bets for another Fed rate hike in October. This, along with inflationary concerns, has been pushing US bond yields to multi-year highs and lending support to the Greenback. Apart from this, persistent geopolitical uncertainties stemming from the US-Iran standoff might continue to benefit the safe-haven buck, validating the negative outlook for the GBP/USD pair and backing the case for further losses.
Hopes for a diplomatic solution to end the seven-month-old US-Iran war faded after US President Donald Trump turned down a seven-day ceasefire proposal from Iran. Moreover, Qatari efforts to broker a US-Iran breakthrough made little progress this week. In further developments, US officials think Trump could order a return to major combat after the midterms. This keeps the geopolitical risk premium firmly in play, which favors USD bulls and suggests that the path of least resistance for the GBP/USD pair remains to the downside.
GBP/USD daily chart
Technical Analysis
The GBP/USD pair keeps a bearish near-term tone and a break below the 1.3200 mark will set the stage for a fall towards retesting the year-to-date low, around the 1.3140 region, touched in June. This is followed by the 1.3100 round figure, which, if broken, will set the stage for an extension of the recent downtrend witnessed over the past month or so.
On the top side, any attempted recovery is more likely to confront stiff resistance ahead of the 1.3300 mark. A sustained strength beyond, however, could trigger a short-covering move and lift the GBP/USD pair back to the 200-day Simple Moving Average (SMA) at 1.3448.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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