GBP/USD Technical Analysis: Bears’ Control Continues

During the recent trading sessions, the bears tried to stop the pace of losses for the GBP/USD currency pair at the psychological support level of 1.2000 so as not to increase the currency pair’s suffering. We see that it is subject to more collapse, especially if the US inflation numbers come today. The improvement will prompt the US Federal Reserve to raise interest rates strongly until the country’s record inflation is contained.

What is expected for the sterling dollar pair in the coming days?

Sterling is likely to fall to its lowest level since the pandemic crash as the US Federal Reserve’s rate hike path continues to outpace that of the Bank of England according to Societe Generale analyst Olivier Korber. Korber wrote in a note that the Bank of England’s latest recession warning combined with rising expectations of another 75 basis point interest rate hike in the US could put sterling at risk of falling below the $1.20 support “in the very near term”.

• The British currency rose in late July on expectations that the Federal Reserve would move away from aggressive tightening.
• The recovery was cut short this month as US officials sounded more hawkish and the BoE delivered a bleak economic outlook that overshadowed a 50bp rate hike.
• The pound has fallen by 10% since the beginning of 2022 so far against the dollar, ranking third among its peers in the Group of Ten, as the path of raising interest rates by the Federal Reserve has exceeded that of the Bank of England.

The analyst added, “Recession fears are now easing in the United States, and the debate has begun about whether there will be a second consecutive increase for the Fed by 75 basis points.”

Swaps referring to Fed meeting dates were priced back to levels indicating another 75 basis point increase in September is likely to come after stronger-than-expected jobs data on Friday. If the bearish outlook for sterling continues, Korber expects the pound to fall to between $1.14 and $1.20 within a month.

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