Will GBPUSD Avoid Further Depreciation?
On August 3, GBPUSD reacted impulsively to a very strong technical zone. This zone was a combination of the Fibonacci levels 38.2 and 61.8, also known as a DiNapoli cluster. In addition, the area saw a simple ABC correction with an equal-sized AB=CD wave (a very strong correction). The zone was located between 1.2650 and 1.2637. The reaction was excellent, but the bulls were unable to return to the uptrend channel (blue lines) and after a 5-day battle, the bears gained the upper hand.
The supply was able to take advantage of this development due to the US data released on Thursday and Friday (CPI and PPI).
On Friday, we had surprisingly good data from the UK on GDP. GDP is now estimated to be just 0.2% below its pre-pandemic level in Q4 2019. This is a better-than-expected development, but it still does not take away concerns surrounding the UK economy and the risks of stagflation. Services contributed 0.16%, production 0.25%, and construction 0.11% on the month. The improvement in the services sector is at least positive, after having stagnated in May.
However, this was not enough for the market to strengthen the GBP.
At the moment, it seems inevitable that the last lows at 1.2620 will be tested. The next very strong support for the bulls is at 1.2590. Overcoming these levels could mean big problems for the bulls and we could see a deepening of the declines.
Additionally, the 100-day moving average (MA) passes through this zone. This further strengthens the significance of these levels.
It is also worth noting that the price will respect the downtrend channel (red lines).
The supply was able to take advantage of this development due to the US data released on Thursday and Friday (CPI and PPI).
On Friday, we had surprisingly good data from the UK on GDP. GDP is now estimated to be just 0.2% below its pre-pandemic level in Q4 2019. This is a better-than-expected development, but it still does not take away concerns surrounding the UK economy and the risks of stagflation. Services contributed 0.16%, production 0.25%, and construction 0.11% on the month. The improvement in the services sector is at least positive, after having stagnated in May.
However, this was not enough for the market to strengthen the GBP.
At the moment, it seems inevitable that the last lows at 1.2620 will be tested. The next very strong support for the bulls is at 1.2590. Overcoming these levels could mean big problems for the bulls and we could see a deepening of the declines.
Additionally, the 100-day moving average (MA) passes through this zone. This further strengthens the significance of these levels.
It is also worth noting that the price will respect the downtrend channel (red lines).
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