Market Overview

GBP/USD Forecast: 50 DMA Support Turns To Resistance As Fed Chair Indicates More Hikes

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  • A 50-day moving average at 1.2972 on a daily chart turns resistance after as Sterling slides on the indication of Fed hiking further. 
  • The UK Prime Minister national Tory convention speech called for unity in Brexit negotiations with the UK ready for no deal Brexit if concessions are not met.
  • Break below 50-day moving average brings targets of 1.2935 and 1.2900 into the spotlight. 

Sterling is trading little changed on the upside at around 1.2965 level on Thursday after the Federal Reserve chairman Jerome Powell indicated more rate hikes are coming. During the panel discussion in Washington DC on Wednesday Powell said Fed may raise rates past “neutral” territory as they need to gradually move towards normal as they are far from “neutral” still accommodative. Comments from Fed chairman pushed the US Dollar higher across the board. 

In the UK, the ruling Conservative party annual conference ended with no clear outcome for heating Brexit negotiations that are set to restart next week. The Tory party conference saw ex-Foreign Secretary Boris Johnson supporting Prime Minister Theresa May, while May confirmed that further concessions are to be made in key questions of the Irish border. Theresa May said the UK is ready to accept no deal Brexit than bow to demands from the European Union, making her negotiating position harder.

The European Union officials said that they are preparing the Brexit talks dinner for October 17.

While the economic news is losing the grip on Sterling with the UK manufacturing, construction and services PMI passing by with little effect on the currency market, the Brexit headlines are a clear winner in the game with uncertainty building up weighing on Sterling. 

The GBP/USD fell past key support level of 1.2972 representing the 50-day moving average and approached 1.2920 level after comments for Federal Reserve chairman Jerome Powell. The GBP/USD is correcting higher with 50-day moving average turning to resistance now. While technical oscillators including Momentum and the Relative Strength Index are pointing lower hovering in neutral territory, Slow Stochastics is still pointing sharply lower within the Oversold territory. Break below 1.2972 level saw Sterling sliding further down to 1.2920 with targets of 1.2935 August 22 high and 1.2900 round big figure being next. 

GBP/USD daily chart

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Posted-In: Brexit FXStreet GBP/USDNews Forex Federal Reserve Markets

 

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