Attempted Recovery Aided by USD Pullback
The GBP/USD currency pair is going back and forth within a range of 20 pips in the European session while it is defending little bids just over the 1.2200 area. The pair’s attempt at recovery might be linked to a general drawback in the US Dollar against its major rival in the currency market for the past twenty years.
The US Dollar drew back from its highest point just a little bit less than the 150.00 benchmarks.
The goodish shift in the market’s risk sentiment as a reaction to the news of the reopening of Shanghai is not really serving the advancement of the safe-haven US Dollar. Although it is elusive that there would be a further increase in the US Dollar, this is caused by the rally of the US Treasury bond yield in the curve.
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GBP/USD price chart. Source TradingView
The general economy and the divergence in monetary policies between the US and UK economies are likely to put the Pound in a position of being undermined in the short term. All attention will now be focused on the Michigan consumer sentiment report and statements expected from the US Federal Reserve top officials to give new impetus for trading.
By the coming week, the market focus would shift to the retail sales report from the US and the inflation report from the UK.
RSI Goes Flat, Indicating Loss of Recovery Traction
Observing the pair on the four hourly charts, the price has shown a modest recovery after it found bids at 1.2165 on Thursday. That seemed to become the deciding trend line support. It should be noted that the US Dollar is moving between a bullish formation following the brief bounce back it had on the 4th of May close to the 1.2535 area.
The relative strength index has become flat on the oversold area while it is under the midline. This indicates that the momentum of recovery might be losing its traction. If it happens that there is an acceleration of the downward pressure, then it would challenge the reset of the support line, currently at 1.2136.
However, any reach in the latter phase would cause a new fall in the direction of the 1.2100 area. On the other hand, any attempt at recovery would have to recapture the instant upside barrier at 1.2250. It is above this that the 21-period simple moving average for bears at 1.2268 will get probed.
Upward still, the declining trendline resistance at 1.2309 will be the GBP sellers’ last line of defense.
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