There is no change in my technical view for the performance of the GBP/USD pair. 

• At the beginning of this week’s trading, and despite the holiday in Britain, the price of the GBP/USD currency pair fell to a stronger support level, towards 1.1648, its lowest since the height of the market crash in 2020. It settled around the 1.1700 level at the beginning of trading today, Tuesday.
• The US dollar is still the strongest against everyone with expectations of a strong raise of the US interest rates in the coming months to contain US inflation, which has reached its highest level in 40 years.
• The sterling faces strong expectations of a British economic recession and the uncertainty of the political future in the country to choose a new prime minister.

Federal Reserve Chairman Jerome Powell delivered a stark warning on Friday about the Fed’s determination to fight inflation by raising US interest rates further: it will likely cause pain to Americans in the form of a weak economy and job losses. The message arrived with a heavy blow to Wall Street markets, sending the Dow Jones Industrial Average down more than 1,000 points on the day.

“These are the unfortunate costs of lowering inflation,” said Powell in a high-profile speech at the Federal Reserve’s annual economic symposium in Jackson Hole.

Investors had been hoping for a signal from Powell that the Fed may adjust US interest rate hikes soon later this year if inflation shows more signs of abating. But the Fed chief indicated that time may not be soon, and stocks have fallen in response.

Runaway price hikes have left most Americans nervous about the economy, even as the unemployment rate has fallen to a half-century low of 3.5%. It also caused political risks for US President Joe Biden and congressional Democrats in the fall elections, as Republicans decried Biden’s $1.9 trillion financial support package, approved last year, as driving up inflation.

Some on Wall Street expect the US economy to fall into recession later this year or early next, after which they expect the Federal Reserve to reverse itself and cut interest rates. However, a few Federal Reserve officials have opposed this idea. Powell’s comments suggest that the Fed aims to raise the benchmark interest rate – to about 3.75% to 4% by next year – but not so high that the economy falters, hoping growth slows long enough to conquer high inflation.

GBP/USD Forecast:

There is no change in my technical view for the performance of the GBP/USD pair.  The general trend is still bearish and stability below the 1.2000 psychological support motivates the bears to move further down, amid clear ignoring the movement of the technical indicators on the daily chart to oversold levels.

There will be no chance for the sterling to recover for a while without sudden indications from the Bank of England, which is determined to raise interest rates with no fear of economic recession. According to the performance on the daily chart, breaking the resistance 1.2080 is important for the bulls to launch and change the direction, even for a short time.

On the downside, the general trend is the strongest so far, the closest support levels for the currency pair are 1.1640, 1.1580 and 1.1500, respectively. After returning from a British holiday, money supply figures, net lending to individuals and mortgage approvals will be announced. From the United States, the US consumer confidence and the number of job openings will be announced.

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Gold prices continued to rise, to continue its gains for the fifth consecutive session. The price of gold moved towards the resistance level of 1982 dollars an ounce, the highest for the yellow metal in a month. Gold gains came as concerns about inflation and the ongoing war in Ukraine continued to urge investors to search for a safe haven commodity. The weak US dollar and lower Treasury yields also supported the rise of gold. The yield on the US 10-year Treasury bonds fell from the highest closing level in three years, which was recorded on Monday. The US dollar index slipped to 99.83, losing nearly 0.5% from the previous close, after jumping as high as 100.52 in the Asian session.

On the economic side, data from the Labor Department said that the US producer price index for final demand rose 1.4% in March after advancing by an upwardly revised 0.9% in February. Economists had expected producer prices to jump 1.1%, compared to a 0.8% increase originally recorded from the previous month. Energy prices led the way up, jumping 5.7% during the month, while food prices also rose 2.4%.

With the larger-than-expected monthly increase, the annual rate of producer price growth accelerated to a record high of 11.2% in March from 10.3% in February.

Elsewhere, the Office for National Statistics said consumer price inflation in Britain rose to 7% in March from 6.2% in February. The rate was expected to rise to 6.7%. It was the highest annual inflation rate in the national statistics series, which began in January 1997. It was also the highest in the model historical series since March 1992, when it reached 7.1%.

Technology stocks led gains in the US stock market, with bond traders cutting aggressive bets on the Federal Reserve’s rate hikes amid speculation that inflation may approach a peak. Investors also weighed the start of earnings season against geopolitical risks.

The S&P 500 halted its decline for three days, while the high-tech Nasdaq 100 outperformed. Another drop in two-year Treasury yields, which are more sensitive to impending monetary policy decisions – led to a decline this week to about 15 basis points. The Canadian dollar rose after the Bank of Canada raised its interest rate by half a percentage point in its largest increase in more than two decades. Oil traded above the $100 per barrel mark.

Bond yields fell even after the prices paid to US producers jumped by the most ever, topping all estimates. This contrasts with the recent consumer price report, which showed a deceleration in the pace of core inflation. For analysts, the large moves across the front-end of the Treasury market reflect diluted bets on the extent to which the Fed will tighten policy in the current business cycle.

Traders have also been keeping an eye on recent geopolitical developments, with President Joe Biden saying the United States will expand the size and range of weapons it provides to Ukraine in a new $800 million package of military aid. This includes heavy artillery systems and armored personnel carriers – indicating a more intense commitment than the country has already undertaken – along with additional artillery shells and helicopters.

Technical expectations for the gold price: The bullish trend in the gold market is getting stronger, and the price of an ounce of gold crossed the 1975 dollar barrier. Expectations may increase again to move towards the next historical psychological resistance level of 2000 dollars an ounce at the earliest. This is especially if the gold market continues to ignore the trend of global central banks to further tighten their policy. Global geopolitical tensions and the persistence of the epidemic will remain the most important factors supporting the bulls’ dominance.

On the other hand, according to the performance on the daily chart, the movement of the gold price towards the support level of 1920 dollars per ounce will be important to enable the bears and I still prefer buying gold from every descending level.