GBP/USD entered a sliding mode this week, perhaps after BoE MPC member Jonathan Haskel said on Monday, that reducing stimulus is not the right option for the foreseeable future.
Remember that last week, MPC member Michael Saunders expressed a different view, saying that economic activity has recovered a bit faster than forecast in May and that it may become appropriate fairly soon to withdraw some stimulus.
Haskel’s remarks came to weigh on expectations over a sooner action by the BoE, which combined with still elevated bets over a Fed hike in the first months of 2023 kept Cable in a downtrend.
The pair continues to trade below the downside resistance line drawn from the high of June 11, as well as below all three of our moving averages on the 4-hour chat. Yesterday, the rate hit support near 1.3570, and today, it rebounded somewhat. However, as long as traders keep the pair below the aforementioned downside line, we would continue aiming lower.
The recovery may continue for a while more, but the bears may take charge again from near the 1.3690 zone, or the 1.3743 barrier, which acted as a strong support on July 2 and 7. They could then target once again the 1.3570 zone, the break of which could set the stage for extensions towards the 1.3450 area, defined as a support by the low of Jan. 11.
Shifting attention to our short-term oscillators, we see that the RSI has bottomed within its below-30 zone and looks ready to exit that territory soon, while the MACD, although below both its zero and trigger lines, has bottomed as well, and could soon emerge above its trigger line. Both indicators detect slowing downside speed and suggest that today’s recovery may continue for a while more before the bears decide to shoot again.
Now, the move that could turn the short-term outlook to a positive one is a break above 1.3800 in our view. That level is marked as a resistance by the inside swing lows of July 13 and 14. Such a move may also take the rate above the downside line taken form the high of June 11 and may initially pave the way towards the peak of July 12, at around 1.3910. Another break, above 1.3910, could extend the advance towards the psychological round figure of 1.4000, near which the rate was stopped from moving higher on June 23.