- GBP/USD has moved south following Friday’s modest rebound.
- Near-term support seems to have formed at 1.33340.
- Eyes on talks at Belarus border between Ukrainian and Russian delegations
GBP/USD has started the new week on the back foot pressured by another bout of flight to safety amid escalating geopolitical tensions. If sellers push it below 1.3340, it will likely face more bearish pressure.
The UK and the US decided to exclude some Russian financial institutions form the SWIFT system over the weekend. The UK also announced early Monday that it will ban any UK natural or legal person from engaging in financial transactions involving Central Bank of Russia. On Sunday, Russian President Vladimir Putin put deterrent forces, including nuclear arms, at the highest threat level.
As delegations from Russia and Ukraine prepare for talks at the Belarus border, the Ifax news agency reported that Russia was interested in coming to an agreement with Ukraine as soon as possible. Separately, Russian forces have reportedly taken control of the Ukrainian cities Berdyanks & Enerhodar.
The market reaction to geopolitics since last week has been straightforward and predictable. The greenback outperforms major European currencies when safe-haven flows dominate the action and it loses strength when market participants turn optimistic – in this case during a de-escalation of the conflict. Given the current state of affairs, a diplomatic resolution to the Russia-Ukraine conflict seems unlikely. Accordingly, the dollar will likely continue to be preferred over British pound in the near future.
The ISM Chicago will later release the February purchasing manager’s index report. But it would not surprise to see a noticeable market reaction.
GBP/USD Technical Analysis
GBP/USD appears to have reached interim support at 1.3340 after the bearish opening gap. If that level turns into resistance, the pair could decline toward 1.3300 (psychological level) and 1.3280 (static level, multi-month low) afterwards.
On the other hand, 1.3400 (psychological support) acts as initial resistance to 1.3430 (static support, 20-period SMA, four-hour chart). A daily close above the former is likely attract buyers and open the doors for an extended rebound towards 1.3500.