GBP/USD Price Analysis: Defends 1.2000 as USD Index corrects after hawkish Fed bets fade
- GBP/USD has delivered a breakdown of the Inventory Distribution formed in the 1.2140-1.2200 range.
- The 20-period EMA at 1.2081 will act as a barricade for the Pound Sterling.
- The BoE officials were in talks with counterparts, as they all raced to assess the potential impact of the Credit Suisse fiasco.
The GBP/USD pair has attempted a recovery move from the psychological support of 1.2000 in the early Asian session. The Cable witnessed a sell-off on Wednesday after reports citing internal ‘materialistic weaknesses’ in Credit Suisse spooked market sentiment. The release of the financial budget by United Kingdom Finance Minister (FM) Jeremy Hunt failed to provide a cushion to the Pound Sterling.
The US Dollar Index (DXY) has corrected after challenging the critical resistance of 105.00 as the release of weak United States Retail Sales and lower Producer Price Index (PPI) figures confirmed that the US inflation is meaningfully declining. This eased hawkish Federal Reserve (Fed) bets dramatically.
Meanwhile, Bank of England (BoE) officials were in talks with counterparts, as they all raced to assess the potential impact of the problems at Credit Suisse, a ‘systemically important’ institution that is enmeshed in the global financial system, as reported by the Telegraph. It further added that experts predicted that it will require a bailout to prevent a collapse that would rock banks and pension funds around the world.
On an hourly scale, GBP/USD has witnessed a breakdown after an Inventory Distribution in which inventory is transferred from institutional investors to the retail participants. The Cable has sensed a cushion plotted near 1.2020.
Going forward, the 20-period Exponential Moving Average (EMA) at 1.2081 will act as a barricade for the Pound Sterling.
The Relative Strength Index (RSI) (14) has climbed into the 40.00-60.00 range from the bearish range of 20.00-40.00. Usually, a power-pack action is followed by a volatility squeeze.
Should the Cable break below the psychological support of 1.2000, US Dollar bulls would drag the asset toward February 27 low at 1.1922, followed by March 08 low at 1.1803.
Alternatively, a move above February 21 high of around 1.2140 will drive the Cable toward March 14 high at 1.2203. A breach above the latter would expose the asset to the round-level resistance at 1.2300.