GBP/USD posts lowest close since mid-January

The pound fell against the US dollar on Tuesday and erased Monday’s gains. GBP/USD is about to post the lowest close in almost two months as it trades around 1.2150. During the American session, the pound gained momentum and trimmed losses. 

The pair bottomed at 1.2108, the lowest since January 17 and then rebounded. The recovery was capped by the 1.2170 area and during the last hour, it has been trading in a range, around 1.2160. 

Tomorrow is likely to be another volatile day for the pair. During the European session, UK employment data will be released. The Brexit process continues to pressure the pound. 

Later on Wednesday, the key event will be the Federal Reserve decision. A rate hike is expected and the FOMC staff will release update macroeconomic projections and Chairwoman Yellen will hold a press conference. The events related to the Fed are likely to affect financial markets. 

Technical outlook 

Cable continues to move with a bearish bias. So far the area above 1.2100 capped the decline and become a relevant support. Any recovery below the 1.2300 area, is likely to be considered a bullish correction; a break above could remove the short-term downward pressure. 

“Technical readings in the 4 hour chart favor additional declines, as the intraday recovery was contained by selling interest around 1.2165 and a horizontal 20 SMA, whilst technical indicators have quickly turned south after a modest advance, with the RSI currently at 43, anticipating some further slides on a break below 1.2110”, said Valeria Bednarik, Chief Analyst at FXStreet.