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Will GBP/USD Fall to Fresh 1-Year Lows?
For the past 4 months, sterling has been gradually losing value against the U.S. dollar and earlier this month, the currency pair dropped to fresh 1 year lows. Initially the move was driven by expectations for earlier tightening by the Federal Reserve but the selling gained momentum after weaker UK data raised concerns about the pace of BoE tightening. Last week, the Bank of England lowered their growth and inflation forecasts forcing banks to push out their own timeline for when the MPC will raise rates. Sterling fell as a result but is still holding above its 1 year low. Whether this level is broken could be determined within the next 24 hours with the release of the BoE and FOMC minutes. If the minutes show a more cautious BoE and more optimistic Fed, it would reinforce the divergence in monetary policy direction, sending GBP/USD below 1.5593.
Taking a look at the weekly chart of GBP/USD, the currency pair has broken below the 61.8%, paving the way for further losses. Although there is some support at 1.56, the next main support level is 1.5350, the 50% Fibonacci retracement of the 2009 to 2014 rally. As for resistance, the former support at 1.5725 is the level to watch but GBP/USD needs to clear 1.58 to alter market momentum.