(Eren Sengezer – FXStreet)
– GBP/USD has extended its slide to a fresh multi-year low on Monday.
– UK markets are closed due to the Summer Bank Holiday.
– Wall Street’s main indexes look to open deep in negative territory.
GBP/USD has edged lower during the Asian trading hours on Friday and touched its weakest level since March 2020 at 1.1650 before erasing a small portion of its daily losses. Since UK markets will remain closed due to the Summer Bank Holiday on Monday, the pair could stay in a consolidation phase during the first half of the day.
In his opening remarks delivered at the annual Jackson Hole Symposium on Friday, FOMC Chairman Jerome Powell reminded markets that they will not rush to loosen the policy once they move it into restrictive territory. “Restoring price stability will take some time, require using central bank’s tools forcefully,” Powell said and repeated that they will continue to monitor the data before deciding on the next policy step.
In the second half of the day, market participants will pay close attention to the performance of Wall Street’s main indexes amid a lack of high-impact data releases.
On Friday, the S&P 500 lost more than 3% on Powell’s hawkish remarks and US stock index futures are down between 0.6% and 1.1% during the European trading hours on Monday.
In case safe-haven flows continue to dominate the market action in the second half of the day, GBP/USD could find it difficult to stage a recovery.
GBP/USD Technical Analysis
GBP/USD continues to trade within the descending regression channel coming from August 12 and the Relative Strength Index (RSI) indicator on the four-hour chart continues to move sideways near 30. These developments suggest that the pair’s bearish bias stays unchanged with a potential to make an upward correction in the near term.
On the upside, 1.1700 (psychological level) aligns as first resistance ahead of 1.1725 (upper limit of the descending channel) and 1.1750 (static level). In case the pair rises above 1.1750 and starts using it as support, it could shake off the bearish pressure and go into a consolidation phase.
On the other hand, static support seems to have formed at 1.1650 (static level). With a four-hour close below that level, the pair could extend its slide toward the lower limit of the descending channel at 1.1600.