(Eren Sengezer – FXStreet)
– GBP/USD has dropped to fresh multi-week lows below 1.1800.
– The pair closes in on the multi-year low it touched at 1.1760.
– The dollar capitalizes on safe-haven flows to start the week.
After having lost nearly 300 pips last week, GBP/USD has failed to stage a rebound and touched its lowest level in five weeks at 1.1782 during the European trading hours on Monday. The near-term technical outlook points to oversold conditions but sellers could look to dominate the pair’s action unless 1.1800 is confirmed as support.
The souring market mood at the beginning of the week provides a boost to the greenback. The US Dollar Index, which gained more than 2% last week, continues to stretch higher early Monday. Reflecting the risk-averse market environment, the UK’s FTSE 100 Index is down 0.7% and US stock index futures are losing between 0.95% and 1.5%.
The Federal Reserve Bank of Chicago’s National Activity Index for July will be the only data featured in the US economic docket. Investors are likely to stay focused on risk perception. In case Wall Street’s main indexes suffer heavy losses, the dollar should be able to continue to outperform its rivals.
On Tuesday, S&P Global will release the preliminary PMI surveys for the UK. Markets expect the headline Composite PMI to decline to 51.3 from 52.1, pointing to an expansion in the private sector’s business activity at a softening pace. A reading below 50 could remind investors of the possibility of the UK economy tipping into recession toward the end of the year and weigh on the British pound.
GBP/USD Technical Analysis
At the time of press, GBP/USD was trading within a touching distance of 1.1800. In the meantime, the Relative Strength Index (RSI) indicator on the four-hour chart stays below 30, suggesting that the pair is technically oversold. In case the pair manages to go into a consolidation phase above 1.1800, additional recovery gains toward 1.1840 (static level) and 1.1900 (psychological level) could be witnessed.
On the downside, GBP/USD could target 1.1760 (multi-year lows) and 1.1700 (psychological level) if buyers give up on 1.1800.
Read Technical Analysis: Gold, EURJPY
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