GBP/USD Price Finds Support Below 1.3650, Vulnerable to Break 1.36
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- GBP/USD reversed an early gain to a weekly low on Tuesday by attracting bearish traders.
- A drop in the UK unemployment rate and the Bank of England’s rate hike bets have boosted sterling.
- With recent UK political drama, rising US bond yields supported the US dollar and limited its gains.
After the release of UK jobs data, the GBP/USD price reversed its daily decline to a weekly low, stabilizing just below the mid-1.3600.
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The pair fell again in early trading Tuesday following last week’s decline as the US dollar maintained its buying interest. In addition to the prospect of faster Fed tightening, the continued rise in US Treasury yields was a key factor supporting the dollar.
Treasury yields rose to their highest levels since January 2022 as expectations grew that the Fed will raise interest rates in March 2022. This strengthened the dollar’s status as a safe-haven asset, sending the GBP/USD pair to a weekly low of around 1.3620.
The British pound has gained ground due to hopes that the Omicron outbreak won’t cripple the UK economy, as well as mounting bets on a further BOE rate hike. In addition, the unexpected fall in unemployment in the UK to 4.1% in the three months to November attracted buyers to the GBP/USD pair at lower levels.
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A recent political development in the UK prevented the attempted restoration. Boris Johnson’s resignation is being called for within the Conservative Party after admitting he attended a lockdown-breaking party in May 2020. This, in turn, will discourage traders from making bullish bets on the GBP/USD pair.
Later in the North American session, traders look forward to releasing the US economy list, including the Empire State Manufacturing Index. On the other hand, the focus will remain on the upcoming FOMC meeting on January 25-26, which is expected to determine the next phase of the GBP/USD pair’s direction.
GBP/USD price technical analysis: Bears to pounce 1.3600
The GBP/USD price fell to 1.3620 but found mild support around the 50-period SMA on the 4-hour chart. However, the outlook is not quite positive, and the price may see another plunge below 1.3600 area. The average daily range for the pair is 53% which is slightly higher than usual. Meanwhile, the volume data shows a strong bearish bias.
