GBP/USD Forecast: Risk-off Sentiment Keeping Depressed Under 1.35

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  • After deterioration in risk sentiment on Monday, GBP/USD fell more than 100 pips.
  • The pound suffered from tensions in Eastern Europe, Fed tightening, and British political troubles.
  • All eyes are on Fed now to find further directional bias. 

The GBP/USD forecast remains bearish as the poor risk sentiment amid geopolitical tension and Fed’s tightening continues to weigh on the pound.

At the time of writing, the pound is trading around 1.3470 due to the rising Russian-Ukrainian crisis, as well as a Federal Reserve policy meeting, which the central bank may use to make recommendations for tightening policy conditions.

In the meantime, US stocks fell sharply, falling from 1.67% to 2.51%, while the Japanese yen, Swiss franc, Euro, and US dollar were among the forex market’s winners.

IHS Markit’s January PMI for the UK was disappointed yesterday in the European session. The manufacturing business activity index was 56.9 versus 57.6 expected, and the services index was 53.3 versus 54.0 expected. In February, the composite PMI dropped to 53.4 from 54.0, its lowest level since February 2021.

As part of the Conservative Party, Boris Johnson faces increasing pressure after it was revealed by December 2021 that the so-called “party leader” at 10 Downing Street was becoming a liability.” Last week, two polls showed two-thirds of voters want him to resign.

Brexit concerns over the Northern Ireland Protocol and Article 16 will continue to pressure the weak British pound, which is down 0.58% in a month.

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Therefore, GBP/USD traders will be watching the Federal Reserve’s monetary policy meeting on Tuesday. In addition, Fed Chair Jerome Powell will hold a press conference following the monetary policy statement released on Wednesday.

GBP/USD price technical forecast: Downside risk prevails

gbp/usd price forecast

The GBP/USD price fell below the 200-period SMA on the 4-hour chart and paused the fall just below 1.3450 support. Despite a minor pullback to 1.3490, the upside potential remains shallow as the volume is still bearish-biased. However, the bullish reversal can be confirmed if the price jumps above 1.3550 resistance.

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The average daily range for the pair is 32% so far, which shows normal volatility for the day. On the downside, the next support will be 1.3450 ahead of 1.3400. However, after a huge fall, we may expect a strong pullback before continuing the downtrend.

About Saqib Iqbal PRO INVESTOR

Saqib Iqbal is a market analyst, prop fund trader and mentor, serving the industry with his analysis and educational content since 2011. The author has great exposure to different financial markets and institutions. He's well-known for his day trading reviews and multiple timeframe analysis.