The GBP/USD pair continues with its struggle to gain any meaningful traction and remains confined in a narrow range through the early North American session. The pair is currently placed around the mid-1.1500s and moves little following the release of the US monthly jobs report.

In fact, the markets are still pricing in a greater chance of a supersized 75 bps Fed rate hike move at the September policy meeting. This remains supportive of elevated US Treasury bond yields, which, in turn, should assist the USD to stall its corrective pullback from a two-decade high touched on Thursday. Apart from this, a bleak outlook for the UK economy further contributes to keeping a lid on any meaningful upside for the GBP/USD pair, at least for now.

Despite Friday's rebound, the Relative Strength Index (RSI) indicator on the daily chart stays below 30, suggesting that GBP/USD has more room on the downside before it corrects its oversold conditions.

On the upside, 1.1700 (psychological level, mid-point of the descending regression channel coming from March) aligns as first resistance ahead of 1.1850 (static level, upper-limit of the descending regression channel) and 1.1900 (20-day SMA).

On the flip side, if GBP/USD falls below 1.1500 again and starts using that level as resistance, it could extend its slide toward the 1.1410/1.1400 area (March 2020 low, psychological level).

The Oversold Conditions and Divergence Might Rescue GBPUSD

Sep 03 2022