GBP/USD trims Tuesday’s losses and faces strong resistance as it approaches 1.3400

• The GBP/USD clings to its weekly gains, so far up 0.56%.
• In the last hours, geopolitical headlines easied a bit, though fundamentals regain control.
• Federal Reserve Chair Powell, favors a 25 basis point increase in the March meeting and said the bank would begin a plan to start QT.
• GBP/USD Technical Outlook: Downward biased, but it may print a leg-up before resuming the downtrend.

The British pound recovers some of its previous day losses and advances for the second day in the week on renewed talks between Russia-Ukraine, which will meet on Thursday at the border with Belarus. At the time of writing, the GBP/USD is trading at 1.3381.

The market sentiment is upbeat. European equities recorded gains while US equity indices are rallying, to the detriment of FX’s safe-haven peers. The US Dollar Index, a gauge of the greenback’s value against a basket of six rivals, pares early gains slides 0.06% down at 97.380.

Federal Reserve Chair Powell eyes a quarter-point March rate hike

On Wednesday, Federal Reserve Chair Jerome Powell appeared at the US Congress. Overthere, Powell said he favors a 25 basis points (bps) rate hike in March and commented it would begin a series of increases. Powell commented that he does not rule out a more significant move at a certain point. The Fed Chair emphasized that the US central bank should be nimble due to the uncertainty of the Russia-Ukraine war.

Powell added that he expects inflation to peak in this year and then would begin to fall and added that the US central bank would follow with reductions to its $8.5 trillion assets.

The US economic docket featured the ADP Employment Change for February, which rose 475K higher than the 388K, estimated and could probably be a prelude of Friday’s Nonfarm Payrolls report.

GBP/USD Price Forecast: Technical outlook

On Wednesday, during the Asian session, the GBP/USD  was subdued in the 1.3300-35 range. However, due to a risk-off market mood, cable dropped briefly below 1.3271. At the moment that European traders got to their desks, bounced off the lows, and trimmed earlier losses and probes February 25 daily low at 1.3366.

Despite recovering some of Tuesday’s losses, the sterling remains downward biased. The GBP/USD daily moving averages (DMAs) lie above the exchange rate, and the pair is trading below the mid-line of a descending channel formed since mid-January 2022. However, the GBP/USD can be subject to a leg-up in the near term before resuming the downtrend.

If that scenario plays out, the GBP/USD first resistance would be 1.3400. Breach of the latter would expose the 100-DMA at 1.3491, a possible scenario. In the case of an upside break, though less likely, the next resistance would be 1.3500 and the 50-DMA at 1.3523.

On the flip side, GBP/USD’s first support would be 1,3300, unsuccessfully tested five times. If it gives way to that level, the next support would be the bottom-trendline of the descending channel around 1.3260-50, followed by the 1.3200 figure.