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Pound rebounds to key support level, Fed speech may dominate trading

2024-02-07

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The British pound rebounded slightly against the U.S. dollar on Tuesday (February 6), trading at 1.2563, an increase of 0.26%. The pound and dollar exchange rates continued to fall over the past two days.

After the release of a strong U.S. job market report last week, the market almost completely ruled out expectations of an interest rate cut by the Federal Reserve in March, and the dollar strengthened. Meanwhile, the Bank of England is unusually divided over what happens next in London, which is negative for sterling.

Last week, the Bank of England kept interest rates unchanged, but two members of the Monetary Policy Committee wanted to raise rates, five wanted to keep them unchanged, and one wanted to cut them. This is the first time since 2016 that there has been a three-way vote split.

There is very little data that could move the market the rest of the week, which will leave GBP/USD at the mercy of the Fed spokesperson. A number of important figures from the Federal Reserve will speak next this week.

The extent to which these statements reinforce the market's current view of a possible rate cut in May will be critical. If this outlook solidifies, the dollar could retrace some of its recent extreme gains as markets view rate cuts as not being further delayed.

There will be no major UK economic data until February 13, when official employment data for December will be released.

Since December, the pound has fallen out of the wider trading range that previously dominated the market.

However, this range still has some relevance as its lower limit is the first Fibonacci retracement level of the rise from the October 5 low to the December 28 peak, with GBP/USD at the second The retracement level rebounded significantly. EUR/USD rebounded near Monday's intraday lows, an area from which the market rebounded in mid-December, and now looks likely to offer substantial support.

GBP/USD fell below the 200-day moving average at 1.25643 on Monday. This could be a sign that the weakness has gone too far and bulls will be eager to recapture this level. Psychological resistance at 1.2600 could be key, while the December 7 closing high at 1.25927 could provide resistance below it.

However, the short-term task for bulls may be to keep GBP above this important retracement on the basis of daily and weekly closes.

At 22:34 Beijing time, GBP/USD was trading at 1.2568/69, an increase of 0.30%.

The above information is provided by special analysts and is for reference only. CM Trade does not guarantee the accuracy, timeliness and completeness of the information content, so you should not place too much reliance on the information provided. CM Trade is not a company that provides financial advice, and only provides services of the nature of execution of orders. Readers are advised to seek relevant investment advice on their own. Please see our full disclaimer.

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Pound rebounds to key support level, Fed speech may dominate trading

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