GBPUSD is experiencing bearish conditions due to a dovish BoE
Updated
British private sector business activity grew in June at its slowest pace since November last year, according to the latest S&P Global Flash UK PMI report.
According to Chris Williamson, chief economist at S&P Global, the slowdown partly “reflects the uncertainty surrounding the business environment in the run-up to the general election.” UK service sector inflation remains high “still evident in the survey, but will at least ease from the current 5.7% pace in the coming months.”
UK government bond yields continue to fall, boosted by dovish moves by the Bank of England. Financial markets are currently pricing in a 50/50 chance of a 25 basis point rate cut at the BoE's monetary policy meeting in August and a total cut of just under 50 basis points this year.
On the daily chart,
GBPUSD has technical conditions that support the possibility of a bearish price with pressure from the newly formed short-term price channel, the price channel and the break below the price channel indicate an uptrend for GBP/ The USD is no longer technically functional.
Additionally, GBP/USD is also under pressure from the 21-day moving average (EMA21), along with the RSI pointing down but still quite far from the oversold area. This shows that there is still a lot of room for technical downside for GBP/USD.
With price activity below the 0.618% Fibonacci retracement and within the price channel, GBP/USD is expected to decline further in the near term with a short-term target level of around 1.25956 price points of the 0.50% Fibonacci retracement level.
In the short term, technical conditions lean bearish for GBP/USD and technical levels are in focus again as follows.
Support: 1.25956
Resistance: 1.26650 – 1.27400
According to Chris Williamson, chief economist at S&P Global, the slowdown partly “reflects the uncertainty surrounding the business environment in the run-up to the general election.” UK service sector inflation remains high “still evident in the survey, but will at least ease from the current 5.7% pace in the coming months.”
UK government bond yields continue to fall, boosted by dovish moves by the Bank of England. Financial markets are currently pricing in a 50/50 chance of a 25 basis point rate cut at the BoE's monetary policy meeting in August and a total cut of just under 50 basis points this year.
On the daily chart,
GBPUSD has technical conditions that support the possibility of a bearish price with pressure from the newly formed short-term price channel, the price channel and the break below the price channel indicate an uptrend for GBP/ The USD is no longer technically functional.Additionally, GBP/USD is also under pressure from the 21-day moving average (EMA21), along with the RSI pointing down but still quite far from the oversold area. This shows that there is still a lot of room for technical downside for GBP/USD.
With price activity below the 0.618% Fibonacci retracement and within the price channel, GBP/USD is expected to decline further in the near term with a short-term target level of around 1.25956 price points of the 0.50% Fibonacci retracement level.
In the short term, technical conditions lean bearish for GBP/USD and technical levels are in focus again as follows.
Support: 1.25956
Resistance: 1.26650 – 1.27400
Note
Since touching the support area of 1.2600, corresponding to the 38.2% Fibonacci threshold calculated based on the increase from April, GBP/USD has continuously increased to near the peak of June, and at the same time entered the strong resistance area of 1.2800-1.2900. Therefore, the increased selling pressure is quite understandable.Note
Although the monetary policy differences between the US Federal Reserve (Fed) and the Bank of England (BoE) are still the main factor creating fluctuations in GBP/USD, the return of the USD on a large scale due to risk aversion has ruined the "party" of the British pound.
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