Daily Market Recap – GBPUSD Downward pressure remains, $1.36 support will be decisive

GBPUSD

initially retreated on Friday along with most other major currency

pairs following hawkish comments from some Fed FOMC members before

regaining some ground and ending the session in the green.

The

dollar rallied on Thursday after Kansas City Fed President Esther

George (voting for the 2022 FOMC) and her counterparts at the St. Louis

Fed, James Bullard (voting for the 2022 FOMC) and Dallas Fed, Robert

Kaplan (voting for the 2023 FOMC), told CNBC that they would prefer the

Fed to reduce its asset purchases (tapering) sooner than later.

The

question investors continue to ask is whether the Fed will begin

tapering by the end of the year or wait until next year. Market

participants will therefore scrutinize the rhetoric of Jerome Powell's

speech in Jackson Hole this Friday at 4:00 pm (CEST), although the Fed

chairman is not expected to lift the veil on the central bank's plans

until the next FOMC meeting on September 21-22.

Despite

the bullish candlestick recorded on Friday, the outlook remains bearish

for the GBPUSD as more and more FOMC members seem to favor starting

tapering soon.

I

addition, the market has ended its “reflation” trades that allowed

cyclical assets to outperform the markets in the fourth quarter of last

year and the first quarter of this year. Since late spring, these asset

have been underperforming. Cyclical currencies GBP, EUR, CAD, AUD, and

NZD are underperforming the other major currencies (USD, CHF and JPY)

and the cyclical sectors of the equity market are underperforming the

growth sectors.

From

a technical perspective, pressure remains high on the GBPUSD as

evidenced by lower and lower highs since late spring. However, support

at $1.36 continues to hold which prevents an extremely bearish bias on

the exchange rate.

Support

at $1.36 and the bearish oblique that runs through the recent highs

together form a descending triangle. Support at $1.36 will therefore be

crucial, as a breakout to the downside would signal a medium/long-term

bearish reversal in the GBPUSD.

(Chart Source: Tradingview 29.08.2021)

The

outlook would be bullish again if the triangle were to break out from

the top. A return to the May high of $1.4240 would then be expected.

Traders may look to play on this pattern and short the pair at the

current rate while keeping an eye on the price action in the run-up to

the 1.37 mark.

Support & Resistance Levels:

R3 1.4250

R2 1.4000

R1 1.3850

S1 1.3679

S2 1.3600

S3 1.3508

Disclaimer:

This material has been created for information purposes only. All view

expressed in this document are my own and do not necessarily represent

the opinions of any entity.