GBP/USD Technical Analysis: Watch for Buying Opportunities – 24 August 2022
The US dollar has strengthened sharply in recent days and there are likely to be further gains if global stock markets decline further from recent highs, but this week’s Jackson Hole Symposium will be the main domestic event for the US currency.
In general, the dollar rose against the euro and the pound sterling at the beginning of the week’s trading session as investors reacted to another sharp rise in natural gas prices in Europe, where they bet that the region is ready for a deep recession. The GBP/USD currency pair fell to the 1.1717 support level before settling around the 1.1810 level at the time of writing. The latest move has returned the currency pair to levels last seen during the height of the Covid panic in March 2020.
In general, the fall in the stock markets naturally helped the demand for the “safe haven” of the dollar, and it is unlikely that the gas crisis will end anytime soon.
“Risk aversion rather than expectations of the Federal Reserve Bank’s policy should remain the main support for the US dollar, which is considered a high-yielding safe haven from here,”said Valentin Marinov, head of the Foreign Currency Research Department at Credit Agricole.
Despite the dollar is rising against both the euro and the pound, Cr?dit Agricole told clients that the move was starting to look extended, and the two European currencies were beginning to be oversold. According to the bank’s analysts, “our measures of short-term fair value for both EUR/USD and GBP/USD, which include short-term price spreads and measures of risk aversion, do seem to indicate that the recent selling of the two USD pairs has once again moved deep An undervalued area.”
Therefore, a reversal in the opposite direction may occur before Federal Reserve Chairman Jerome Powell’s speech on Friday. But for now, the rebound must be considered temporary.
“If a persistently tightening message from Federal Reserve Bank President Jerome Powell on August 26 raises global risk sentiment, the dollar may be the main beneficiary,” added Marinov.
The Jackson Hole Economic Symposium, hosted by the Federal Reserve Bank, will be held in Kansas City from August 25 to 27, and its topic is “Re-evaluating constraints on the economy and politics”. Powell is scheduled to speak at 15:00 GMT.
We’re also looking forward to other central bank speakers, with the full line-up likely to be detailed just before Thursday’s proceedings.
“We think this will be a good opportunity to gauge how policymakers think before their next policy decisions, and an opportunity for Fed officials in particular to set clear benchmarks for the market as September’s key data releases approach,” said Camaxia Trifidi, forex analyst at Goldman Sachs.
Goldman Sachs isn’t looking for fireworks from the Fed chief, saying the conflicting nature of incoming US data doesn’t warrant a clear shift either way. Those looking for stocks higher are hoping that Powell will signal the need to speed up interest rate hikes after the latest consumer price index data softened and showed that US inflation may have peaked.
In fact, any such development will hold the dollar back on the net, allowing the likes of GBP/USD and EUR/USD to recover.
The recent movement of the GBP/USD currency pair pushed the technical indicators towards oversold levels according to the performance on the daily chart below.Despite this, forex traders are afraid of the turnout to buy when the markets’ reaction to what will happen in the Jackson Hole seminar is known.
The US dollar is still supported due to US interest rates expectations and the fear of the strongest British recession. Currently, according to the trend, the closest support levels for the currency pair are 1.1755 and 1.1680 respectively. There will be no chance for a first break of the trend without stability above the 1.2100 resistance, otherwise the trend will remain stable around its losses.
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