GBP/USD drops to 1.3850, finds support above weekly lows
- USD extended gains on a deal to avoid US government shutdown.
- GBP/USD remained above yesterday’s low.
- Key event ahead: BoE Super Thursday.
The GBP/USD pair printed a fresh low on Wednesday but remained on top of yesterday’s low. It bottomed at 1.3847, slightly above the weekly low at 1.3834. Near the end of the US session, it was hovering around 1.3880, attempting to move off lows.
Despite falling against the US dollar, the pound is up against the euro and the Swiss franc. The global recovery in equity markets helped the pound. The strengthening was not enough to lift GBP/USD.
The greenback rose further after Senate Majority Leader Mitch McConnell announced a bipartisan deal on a 2-year budget. The pact could avert another government shutdown on Friday. The deal includes a $300 billion more for domestic programs and defense.
Tomorrow the Bank of England will announce its decision regarding monetary policy. No change in rates is expected. Also, the minutes of the meeting will be released together with the Quarterly Inflation Report. No policy change is expected but the tone and the projections will hold the key. The event will take place at 09:30 GMT, an increase in volatility around Pound’s crosses is likely.
Technical outlook
“The GBP/USD pair peaked for the day at 1.3993, a handful of pips shy of the 38.2% retracement of its latest daily decline, and broke below the next Fibonacci support, in line with the ongoing downward pressure”, said Valeria Bednarik, Chief Analyst at FXStreet.
According to her, the 4 hours chart, shows the 20 SMA holding a strong bearish slope, as well as the RSI indicator at 25, “although the Momentum remains directionless within neutral territory, as the pair holds above the mentioned 1.3835 weekly low.”