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GBP/USD Falls To A New Daily Low In The 1.3275 Region As The USD Strengthens

Dollar Reaches Two and a Half Year Low

In the early European session, the Pound/Dollar exchange rate moved lower and fell to a new daily low in the region of 1.3275 in the last hour.

A rebound from sub-1.3200 tiers or the YTD low established on Tuesday failed to materialize, and the duo has been fluctuating within a trading range for the previous 3 sessions.

The stalemate between the United Kingdom and the European Union over the Northern Ireland Guidelines, as well as the escalating dispute between Britain and France over post-Brexit fishing grounds, turned out to be significant factors in the weakening of the British Pound.

A combination of this, as well as the rise of some new US Dollar purchases, resulted in some selling all over the GBP/USD pair on the final trading day of the week.

Review Of The Fundamentals

The Dollar continues to benefit from growing expectations that the Federal Reserve will tighten monetary and fiscal policy relatively soon to contain persistently high inflation.

According to the Wall Street Journal, the money markets began pricing in the possibility of liftoff in June 2022 in response to Fed Chair Jerome Powell’s hawkish remarks previously this week.

Powell stated during his testimony before Congress that the Federal Reserve is likely to accelerate the easing of its bond-buying.

Several FOMC delegates also argued in favor of a more rapid winding down of the stimulus implemented during the pandemic.

Despite this, traders may be deterred from putting aggressive bullish wagers on the relatively secure greenback due to mixed results in the stock markets in recent weeks.

The risk perception in the market has improved a little as concerns about the financial impact of the new and possibly vaccine-resistant Omicron edition of the coronavirus have subsided somewhat.

This, combined with the passage of a law to fund the United States government through the middle of February, contributed to an increase in investor sentiment.

Aside from that, traders may prefer to remain on the sidelines ahead of Friday’s update of the closely watched US monthly employment report, which will be released on Friday.

The much-anticipated Nonfarm Payrolls (NFP) report will have a significant impact on USD price movements and will provide some substantial support to the GBP/USD pair later in the early North American trading session.

Trades will also receive guidance from advancements encompassing the coronavirus story and Brexit-related media stories to take advantage of some short-term opportunities in the market.

Analytical Levels To Watch

GBP/USD CHART Source: Tradingview.com

When looking at the four-hour chart, the Relative Strength Index (RSI) marker is maintaining a level near 50, indicating that the pair is still undecided in the near term.

On the downside, it appears that static support has formed at the level of 1.3280. As long as buyers can maintain their grip on this level, a break above 1.3340 could result in further gains (50-period SMA).

The next target is 1.3380 (100-period), which is in line with the previous target. Supports are located at 1.3240 (static level) and 1.3195, which are both located below 1.3280. (November 30 low)

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