"GBP/USD falls below 1.2200 as USD strengthens
Content: The Relative Strength Index (RSI) on the 4-hour chart has fallen below 40, indicating a short-term bearish trend. The key level for this pair is considered to be 1.2200 (psychological level, static level, 100-period Simple Moving Average, and 50-period SMA).
If 1.2200 is confirmed as support, GBP/USD may extend its recovery towards 1.2250 (20-period SMA) and 1.2300 (23.6% Fibonacci retracement of the most recent downtrend).
On the other hand, if GBP/USD fails to hold above 1.2200, sellers may take interest. Temporary support appears to have formed around 1.2170 (static level) before 1.2130 (static level) and 1.2100 (psychological level, static level).
GBP/USD lost over 100 pips on Thursday, erasing all gains made earlier in the week. On Friday, the pair saw a recovery and stabilized above the 1.2200 level.
Higher US Treasury bond yields on Thursday, following the release of the September inflation report, helped the US Dollar (USD) outperform its peers.
While the US Bureau of Labor Statistics reported that core Consumer Price Index (CPI) inflation fell to 4.1% year-on-year in September, excluding food and energy price swings, the underlying details of the report have revived expectations of a more aggressive Federal Reserve rate hike by year-end. The so-called 'super-core' inflation was up 0.6% monthly, indicating stubborn underlying inflation pressures.
On Friday, the yield on US 10-year Treasury bonds adjusted lower after a more than 3% rise on Thursday, which hampered the US Dollar's recent gains. Meanwhile, US equity index futures were trading modestly higher.
If US bond yields continue to decline in the latter half of the day, the USD could stay subdued, allowing GBP/USD to rally higher before the weekend. Conversely, cautious Wall Street opening along with the rebound in US Treasury yields could exert pressure on this pair.
If 1.2200 is confirmed as support, GBP/USD may extend its recovery towards 1.2250 (20-period SMA) and 1.2300 (23.6% Fibonacci retracement of the most recent downtrend).
On the other hand, if GBP/USD fails to hold above 1.2200, sellers may take interest. Temporary support appears to have formed around 1.2170 (static level) before 1.2130 (static level) and 1.2100 (psychological level, static level).
GBP/USD lost over 100 pips on Thursday, erasing all gains made earlier in the week. On Friday, the pair saw a recovery and stabilized above the 1.2200 level.
Higher US Treasury bond yields on Thursday, following the release of the September inflation report, helped the US Dollar (USD) outperform its peers.
While the US Bureau of Labor Statistics reported that core Consumer Price Index (CPI) inflation fell to 4.1% year-on-year in September, excluding food and energy price swings, the underlying details of the report have revived expectations of a more aggressive Federal Reserve rate hike by year-end. The so-called 'super-core' inflation was up 0.6% monthly, indicating stubborn underlying inflation pressures.
On Friday, the yield on US 10-year Treasury bonds adjusted lower after a more than 3% rise on Thursday, which hampered the US Dollar's recent gains. Meanwhile, US equity index futures were trading modestly higher.
If US bond yields continue to decline in the latter half of the day, the USD could stay subdued, allowing GBP/USD to rally higher before the weekend. Conversely, cautious Wall Street opening along with the rebound in US Treasury yields could exert pressure on this pair.
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