(Eren Sengezer – FXStreet)
– GBP/USD has failed to shake off the bearish pressure.
– Near-term technical outlook suggests that additional losses are likely.
– The pair could target 1.1550 with a drop below 1.1620.
GBP/USD has lost its traction after having failed to clear 1.1750 resistance on Tuesday and ended up closing the third straight day in negative territory. Although the pair stays relatively quiet on Wednesday, the near-term outlook suggests that the pair could suffer additional losses.
The risk-positive market environment helped GBP/USD push higher during the European trading hours on Tuesday. With upbeat macroeconomic data releases from the US allowing hawkish Fed bets to continue to dominate the market action, the dollar gathered strength and forced the pair to reverse its direction. Additionally, Wall Street’s main indexes turned south following a positive opening and helped the USD stay resilient against its rivals.
Early Wednesday, markets remain risk-averse with the UK’s FTSE 100 Index losing 0.4% in the early European session. Meanwhile, US stock index futures, which were up more than 0.5% earlier in the day, started to erase earlier gains, confirming the negative shift in risk mood.
Later in the session, the ADP will release the private sector employment data for August. The ADP announced in June that it suspended the release of employment data while revamping the methodology. Investors are likely to approach the data cautiously ahead of Friday’s Nonfarm Payrolls report. Hence, the risk perception could continue to dominate the markets in the second half of the day.
GBP/USD Technical Analysis
The Relative Strength Index on the four-hour chart stays above 30, suggesting that there is more room on the downside before GBP/USD turns technically oversold. Additionally, the pair has returned within the descending regression channel coming from early August, confirming the sellers’ willingness to retain control of the action.
1.1620 (multi-year lows, mid-point of the descending channel) aligns as first support. Below that level, 1.1600 (psychological level) could act as interim support before the pair could extend its losses toward 1.1550 (lower-limit of the descending channel).
On the upside, 1.1670 (upper-limit of the descending channel) forms key resistance. With a four-hour close above that hurdle, buyers could show interest and lift the pair toward 1.1700 (psychological level, 20-period SMA) and 1.1750 (static level, 50-period SMA).