FX

GBP/USD Price Analysis: Struggles at 1.2490s and tumbles 100-pips as bears regain control

  • GBP/USD is recording losses of 0.98%, almost pairing Tuesday’s gains.
  • UK’s inflation rises to 9% up from 7% the previous month.
  • GBP/USD Price Analysis: Remains downward biased and might re-test the YTD lows at around 1.2155.

The GBP/USD snaps three days of gains and is losing close to 1% during Wednesday’s session on a dampened mood in the financial markets, despite higher than expected inflation reported from the UK. At 1.2365, the GBP/USD reflects a drop of more than 100 pips and almost a full reversal move from Tuesday.

Sentiment remains negative, another factor to consider when trading the British pound. Due to its status as a risk-sensitive currency, when sentiment is negative, traders would seek safe-haven peers, like the greenback and the JPY. Also, the Sterling was struck by high inflation figures, and recapping the Bank of England (BoE), it could reach double digits throughout the year. That, coupled with central bank hiking rates and lower growth, is threatening to push UK’s economy into stagflation. Consequently, cable’s outlook looks cloudy and could weaken further until May 2020 swing lows at around 1.2080.

During the Asian session, the GBP/USD opened near the highs at around 1.2490 and tumbled when the UK’s inflation crossed newswires, breaking several figures on its way down and recording a new daily low at around 1.2360s.

GBP/USD Price Forecast: Technical outlook

The GBP/USD remains downward biased. The rally from YTD lows at around 1.2150s was short-lived, and GBP/USD bull’s failure to reclaim July 2020 swing low-turned-resistance at 1.2479 exposed the major to further selling pressure. Also, the slope of MACD’s line is “almost” horizontal, meaning that it could cross under the signal line, aiming lower, signaling that the GBP/USD might extend its losses.

With that said, the GBP/USD first support would be May 17 daily low at 1.2315. A break below would expose the June 2020 swing lows at around 1.2251, followed by the YTD low at 1.2155.

Key Technical Levels

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