GBP/USD probes post-COVID low: Will we see a bounce?
Risk aversion is the dominant theme to start this week’s trade, and for FX traders, that means broad-based strength in the US dollar.
Mirroring the situation in the European mainland, the UK economy is facing elevated inflation and a slowing (likely soon to be contracting) economy. In the coming months, the BOE is likely to prioritize raising interest rates to fight price pressures, meaning that economic growth in the UK could sputter heading into the winter when higher energy prices start to bite.
From a technical perspective, GBP/USD is probing its lowest level since the start of the COVID pandemic in the mid-1.17s. While it’s hard to imagine the longer-term downtrend forming a sustained reversal any time soon, it its notable that the pair has fallen more than 500 pips in less than two weeks, leaving the 14-day RSI indicator near oversold territory.
Therefore, any modicum of bullish UK or bearish US news could lead to a counter-trend bounce this week, though bulls may want to be quick to take profits if we approach the 1.20 handle given the well-established bearish trend.
Meanwhile, a failure to bounce around the 1.1760 area would signal overwhelming selling pressure that could quickly take the pair toward its COVID lows under 1.1500.
One way or another, GBP/USD’s price action this week will provide a strong signal for FX traders.
Mirroring the situation in the European mainland, the UK economy is facing elevated inflation and a slowing (likely soon to be contracting) economy. In the coming months, the BOE is likely to prioritize raising interest rates to fight price pressures, meaning that economic growth in the UK could sputter heading into the winter when higher energy prices start to bite.
From a technical perspective, GBP/USD is probing its lowest level since the start of the COVID pandemic in the mid-1.17s. While it’s hard to imagine the longer-term downtrend forming a sustained reversal any time soon, it its notable that the pair has fallen more than 500 pips in less than two weeks, leaving the 14-day RSI indicator near oversold territory.
Therefore, any modicum of bullish UK or bearish US news could lead to a counter-trend bounce this week, though bulls may want to be quick to take profits if we approach the 1.20 handle given the well-established bearish trend.
Meanwhile, a failure to bounce around the 1.1760 area would signal overwhelming selling pressure that could quickly take the pair toward its COVID lows under 1.1500.
One way or another, GBP/USD’s price action this week will provide a strong signal for FX traders.
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