Fitch maintains negative outlook on UK credit rating

A bearish technical pattern forming on GBP/USD

By Raed Alkhedr | @raedalkhedr | 8 June 2023

  • Markets anticipate upcoming US Federal Reserve meeting

  • Potential head and shoulders pattern forming on GBP/USD pair

  • Pound's main resistance levels around 12550

The most important economic events affecting the movement of the GBP/USD

Amid a decline in the US dollar index against major currencies, the British pound opened higher against the US dollar for the second consecutive session, trading near 1.2472 dollars. Fitch Ratings maintained its negative outlook on the UK credit rating, reflecting the weak British economy and increased uncertainty in UK-EU trade terms.

Markets anticipate the upcoming US Federal Reserve meeting with expectations of further interest rate increases. Bank of Canada and Reserve Bank of Australia surprised with rate hikes this week. The Federal Reserve will release the latest US consumer price index data before making its interest rate decision, and any rise above May's 4.9% figure is likely to reinforce another increase.

US Treasury Secretary Janet Yellen stated that the US economy is strong with strong consumer spending, but certain sectors are slowing down. She expects progress in reducing inflation over the next two years amid a robust job market. Yellen also highlighted the law to raise the debt ceiling and reduce the US deficit by over $1 trillion, supporting Federal Reserve's efforts to combat high inflation.

Technical and pivotal levels for GBP/USD

The pair attempted to test the resistance level of 1.2550 multiple times but failed, retreating to trade around 1.2464. If it fails to break the 1.2550 resistance, it may retreat and test the support level of 1.2320, representing the support zone and neckline of a head and shoulders pattern forming. A break below this level may continue the decline towards support levels of 1.2170 and 1.2050.

If the pair climbs and breaks the 1.2550 resistance, it could lead to further gains and a potential test of the 1.2640 resistance level.

GBPUSD 6-8-2023