GBP/USD Slips to 1.3550, Can 38.2% Fibonacci Extend Support? 

  • Bank of England policymaker Catherine Mann said that the BoE needs to lean against inflation pressures.
  • The US Treasury Secretary Janet Yellen said on Friday that she was confident that the Federal Reserve.
  • Breakout of the 1.3525 level can trigger a selling trend until the 1.3450 or 1.3395 level.

The GBP/USD pair closed at $1.3554 after hitting a high of $1.3604 and a low of $1.3544. The direct currency pair GBP/USD dropped for another session on Friday. In nine days, it fell to the lowest level, as sterling fell against the US dollar. The US Dollar Index, which measures the greenback’s value against a basket of six major currencies, was down on Friday at 95.64 levels. However, the currency pair GBP/USD continued to decline as the negative pressure on the British Pound was higher than that of the US dollar.

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Catherine Mann remarks on BoE Policy.

On Friday, the Bank of England policymaker Catherine Mann said that the BoE needs to lean against inflation pressures. Moreover, BoE should stop expectations of higher price growth entrenched in businesses’ wage and pricing decisions this year. The bank is widely expected to increase interest rates again at its February 3 meeting. 

In December, the BoE became the first bank in the world to tighten monetary policy in response to post-pandemic inflationary pressures. UK inflation reached its highest level in almost 30 years in December at 5.4%, which was well above the target set by the bank of 2%. Mann said that the monthly survey had shown that businesses’ pricing and wage-setting were not consistent with inflation returning to the 2% target. She further said she was waiting for the new BoE staff briefing before deciding whether rates needed to increase in February.  On Friday, her not-so-hawkish comments added weight to the British Pound and dragged the GBP/USD pair further to the downside.

A quick economic event outlook

On the data front, at 05:01 GMT, the GfK Consumer Confidence dropped to -19 against the forecasted-15 and weighed on the British Pound. At 12:00 GMT, retail sales also declined by 3.7%, against the anticipated 0.6%, and this weighed on the Sterling. Unfavorable data from Britain added to the loss in the price of the currency pair GBP/USD. On the US side, at 20:00 GMT, the CB Leading Index remained flat, with expectations at 0.8%.

Janet Yellen confidence in Fed to boost dollar’s demand

The US Treasury Secretary Janet Yellen said on Friday that she was confident that the Federal Reserve. The Biden Administration would take the steps needed to bring down inflation over the course of 2022. She was hopeful because the COVID-19 pandemic had been brought under control. She said that inflation surged by more than most economists’ expectations. Thus it was their responsibility to address the inflation. These comments from Yellen failed to push the dollar higher, and the greenback continued to decline.

Furthermore, the rising tensions related to the geopolitical situation regarding the Russia-Ukraine issue also added negative pressure on the riskier currency pair GBP/USD. Russia has built up a massive troop presence on its borders with Ukraine. The White House has already warned that Russia was planning an attack on Ukraine, about which European countries have also expressed concerns. The rising tensions between Russia and Ukraine added uncertainty and supported the risk-off market sentiment.

GBP/USD Price Forecast  – Daily Technical Levels

Support Resistance
1.3565 1.3643
1.3536 1.3692
1.3487 1.3720
Pivot Point: 1.3614

GBP/USD
GBP/USD 4-Hour Chart

GBP/USD Price Forecast – 38.2% Fibonacci Retracement in Play 

The GBP/USD price forecast is bearish under an immediate resistance level of 1.3625. The surge in US dollar demand has triggered a sell-off in the GBP/USD pair and now it’s heading lower towards the 38.2% Fibonacci retracement level at the 1.3523 level. The violation of 1.3523 can trigger a strong selling trend until 1.3450 and 1.3395 mark 50% and 61.8% Fibonacci retracement. The closing of the daily candle above this support mark is likely to drive a bounce-off in the pair.

At the moment, the GBP/USD pair’s immediate resistance stays at the 1.3530 level. A surge in demand could lead the GBP/USD price towards the next resistance level of 1.3600 or 1.3680. However, the pair has formed a “three black crows ” candlestick pattern that indicates the chances of a selling trend continuation.

The 50-day exponential moving average is also adding some selling pressure at the 1.3650 level. The closing of candles under this level can drive a downtrend until 1.3525. The RSI and Stoch RSI suggest a selling bias in the GBP/USD pair.

On the lower side, the breakout of the 1.3525 level can trigger a selling trend until the 1.3450 or 1.3395 level. Further on the lower side, the next support can be found around the 1.3300 level. Therefore, consider looking for a buy trade above 1.3520 until the 1.3748 or 1.3775 mark. While sell orders can be placed under 1.3500.

Good luck, and stay tuned for more updates!

About B. Ali PRO INVESTOR

Live webinar speaker and derivatives (Forex, Crypto, and Indices) analyst with a broad range of skills for evaluating financial data, investment trends, technical analysis, fundamental analysis, and the best ways to strategies investment selection.  Expertise: Trading Psychology; Speculative Positioning & Market Sentiment; Technical & Fundamental Analysis.