(Eren Sengezer – FXStreet)
– GBP/USD has started the new week on the backfoot.
– UK markets are closed due to Queen Elizabeth II’s State Funeral.
– Wall Street’s main indexes look to open deep in negative territory.
GBP/USD has failed to gather recovery momentum after having touched its lowest level since 1985 at 1.1350 on Friday. The pair’s action is expected to remain subdued during the European trading hours due to the UK holiday but the risk-averse market mood suggests that the British pound should stay on the backfoot in the second half of the day.
Ahead of the US Federal Reserve and the Bank of England’s monetary policy announcements later in the week, investors remain cautious. Heightened US-China geopolitical tensions also allow safe-haven flows to retain control of the markets.
There won’t be any high-tier macroeconomic data releases from the US and market participants will stay focused on risk perception. As of writing, US stock index futures were down between 0.6% and 0.75%, suggesting that Wall Street’s main indexes could start the day deep in negative territory. Unless US stocks manage to stage a rebound, GBP/USD is likely to have a difficult time gaining traction.
After US President Joe Biden said over the weekend that the US military would defend Taiwan in case China were to try to invade the island, China responded by noting that they reserve the right to take “all necessary measures.”
GBP/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the four-hour chart stays within a touching distance of 30, suggesting that the pair is about to turn technically oversold. On the downside, 1.1350 (multi-decade lows) aligns as significant support. In case buyers fail to defend that level, additional losses toward 1.1300 could be witnessed.
1.1400 (psychological level, static level) aligns as first resistance. For sellers to move to the sidelines, GBP/USD needs to go into a consolidation phase above that level. In that case, the pair could extend its recovery toward 1.1450 (static level, 20-period SMA) and 1.1500 (psychological level, static level).