- GBP/USD has declined below 1.2400 as investors expect aggressive Fed policy following strong US NFPs.
- Given the persistence of inflation in the UK, the Bank of England may not be able to halve inflation by the end of the year, as promised by UK Prime Minister Rishi Sunak.
- Heavy selling pressure was observed in the GBP/USD pair after it failed to break out of the 61.8% Fibonacci retracement level at 1.2583.
Pair gbp/usd It declined sharply below the support of the round level of 1.2400 in the European session. The pound is facing heavy selling pressure as the US dollar strengthened after strong US payroll additions in May brought higher interest rate bets into the picture.
Job growth was very strong in May despite the fact that the Federal Reserve (Fed) continued to raise interest rates and US regional banks put more filters in their credit disbursement mechanisms to maintain their asset quality amid a turbulent environment Are.
The British pound failed to hold up despite expectations of a further interest rate hike by the Bank of England (BoE) amid a tight labor market and persistent food inflation. Given the persistence of inflation in the UK, BoE Governor Andrew Bailey may fail in his bid to halve inflation by the end of the year, as promised by UK Prime Minister Rishi Sunak.
GBP/USD came under heavy selling pressure after failing to break out of the 61.8% retracement of the Fibonacci level at 1.2583 (from the May 10 high of 1.2680 to the May 25 low of 1.2680). At press time, the pound fell below the 23.6% Fibonacci retracement level around 1.2400. The pound has also given up support at the uptrend line from its May 25 low of 1.2308.
The Relative Strength Index (RSI) (14) is near 40.00. A break below this would trigger a bearish move.
If the asset breaks below the May 31 low of 1.2348, the bulls will drag the asset towards the May 25 low of 1.2308. A fall below this last level would take the asset to its April 3 low of 1.2275.
On the other hand, a break above the May 16 high of 1.2547 would send the pound to the May 10 low of 1.2603 and then to the May 10 high of 1.2680.