General analysis GBPUSD for 13.06.2022
Current Dynamics.
GBP/USD rapidly collapsed to monthly lows and is entering a likely consolidation at 1.22100 amid a worsening economy in the Great Britain and a strengthening US dollar.
The GBP/USD pair dropped to current levels from 1.26000 in just a week, having been actively selling for the past four sessions.
Such a rapid fall in the pound sterling value is due to the developing conflict around the decision on Northern Ireland in the context of Brexit, which may further lead to a worsening of the economic situation in Britain, caused by the trade war and the sanctions imposed by the European Commission in case of such a scenario.
Also, the appearance of such an impressive recession was influenced by the negative macroeconomic data on the UK, indicating the obvious stagflation, which could develop into a full-scale recession. Thus, the GDP of Great Britain declined by 0.3% in April, for the second month in a row (0.1% in March). The biggest contributors to the decline in GDP were the service sector (5.6%), especially health and social services, the manufacturing sector (0.6%) due to rising raw material prices and a shortage of suppliers, and construction (0.4%). The last time there was a simultaneous drop in GDP figures for all major items was in January 2021.
Such weak economic data coupled with high inflation pressures dictates the Bank of England to raise interest rates for the fifth time in a row, probably more cautiously than previously expected: 0.25 basis points rather than 0.5, which also creates a bearish sentiment on the pair.
The Fed, in turn, is likely to tighten its monetary policy at the planned high rate due to the ongoing high inflationary pressures. Together with the global cooling of appetite for risk and rising yields of American treasuries, it is natural and traditional to strengthen the position of the US dollar as a safe haven currency.
Generally the situation is in favor of the bears for GBP/USD pair and further decrease of the quotes will not be a surprise for the market. Nevertheless, among the macroeconomic news coming out in the near future, which may affect the further price movement, we should mention the publication of the UK labor market data, the US Producer Price Index (PPI) coming out on Tuesday and data on retail sales, crude oil stocks and the FOMC key rate statement on Wednesday.
Support and resistance levels.
Alligator is hungry: his mouth is wide open, his jaw (blue line) hovers high above his lips and teeth (green and red lines), the instrument is in a downtrend. The nearest fractal below the alligators teeth (red line) is at 1.21800. Awesome Oscillator (AO) and Accelerator Oscillator (AC) are both in the red area, which is a confirmatory sell signal.
- Support levels: 1.20680, 1.21290, 1.21800.
- Resistance levels: 1.22370, 1.22700, 1.23210.
Trading scenarios
- Long positions should be opened at the 1.22370 with a target of 1.22700 and a stop loss at 1.22050. Implementation period: 1-2 days.
- Short positions can be opened at the level of 1.21800 with a target of 1.21290 and a stop-loss at the level of 1.22050. Implementation period: 1-2 days.