The GBP/USD currency pair has fallen to its lowest value since April, hitting around 1.2350 on Thursday. Following this significant decline, the pair struggled to regain momentum during the European trading session on Friday. Current technical indicators suggest a bearish sentiment as investors anticipate important economic data from the United States.
On Thursday, GBP/USD slipped sharply, reaching a nine-month low at 1.2352. Although there was a slight upward movement toward 1.2400 in the European morning hours on Friday, the pair exhibited little potential for a meaningful recovery. As trading volumes normalized after the holiday break, the US dollar gained strength against other major currencies, driven by a cautious market atmosphere. This strength in the dollar was further bolstered by the US Department of Labor’s announcement that weekly initial jobless claims had dropped to 211,000 for the week ending December 28, a decrease from the previous week’s 220,000, and better than the anticipated figure of 222,000.
In the early hours of Friday, US stock futures showed modest gains, which limited further strengthening of the dollar and provided some temporary support for GBP/USD . The day will see the publication of the Manufacturing Purchasing Managers Index (PMI) for December, with expectations that it will remain consistent with November’s reading of 48.4. Should the PMI exceed the 50 mark, it could signal further dollar strength.
Market watchers will also focus on the inflation indicators within the PMI report, particularly the Prices Paid Index, which is projected to rise from 50.3 to 51.7. A stronger-than-expected figure could intensify speculation regarding the Federal Reserve’s approach to monetary policy in its upcoming meeting, posing challenges for GBP/USD to maintain its footing.
On the technical front, the Relative Strength Index (RSI) on the 4-hour chart indicates slight recovery but remains just above the oversold territory of 30. Key support levels are identified at 1.2350, 1.2300, and 1.2250, while potential resistance could emerge around the 1.2400 and 1.2440 levels if the pair gains momentum.
