Pound, Dollar Talking Points:
- GBP/USD under pressure, UK politics weigh on sentiment
- US Dollar strength undermines Sterling after hawkish commentary from the Federal Reserve
- The future of Prime Minister Boris Johnson remains uncertain, a potential catalyst for price action
The British Pound has dropped to a fresh monthly low against the US Dollar after Fed Chair Jerome Powell endorsed the probability of higher rates and quantitative tightening.
With rising inflation and an improvement in the employment rate, the Fed reiterated their intention to continue to reduce net asset purchases, bringing them to an end by March.
Find out more about the impact of interest rates on the foreign exchange market
Meanwhile, UK Prime Minister Boris Johnson remains a hot topic, adding additional pressure to the Sterling.
Although the greenback currently remains the dominant currency for GBP/USD, economic data may still influence the trajectory of the imminent move.
DailyFX Economic Calendar
GBP/USD Technical Analysis
The Fed press conference had an instantaneous negative effect on the Pound, forcing the pair to fall from the key psychological level of 1.350. Since then, GBP/USD bears have maintained control over the imminent move.
GBP/USD 5 Minute Chart
Chart prepared by Tammy Da Costa using TradingView
Despite a strong start to the year, a failed attempt by Cable bulls to drive price actionpast the prior resistance level of 1.375, an increase in selling pressure allowed the pair past the 23.6% Fibonacci support level (of the 2020 – 2021 move) which has now transformed into resistance at 1.354.
With GBP/USD now resting around the 1.336 mark, prices have tumbled back within the confines of the descending channel and towards the next level of support at 1.330. A break below brings the 38.2% of the above-mentioned move at 1.316 while the RSI (relative strength index) heads south.
GBP/USD Daily Chart
Chart prepared by Tammy Da Costa using TradingView
— Written by Tammy Da Costa, Analyst for DailyFX.com
Contact and follow Tammy on Twitter: @Tams707
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