GBP/USD: pound renews March 2020 lows 12 July 2022, 15:50

GBP/USD: pound renews March 2020 lows

12 July 2022, 15:50

Scenario
Timeframe	Intraday
Recommendation	SELL STOP
Entry Point	1.1850
Take Profit	1.1700
Stop Loss	1.1933
Key Levels	1.1650, 1.1700, 1.1800, 1.1854, 1.1933, 1.2000, 1.2074, 1.2163

Alternative scenario
Recommendation	BUY STOP
Entry Point	1.1935
Take Profit	1.2074
Stop Loss	1.1854
Key Levels	1.1650, 1.1700, 1.1800, 1.1854, 1.1933, 1.2000, 1.2074, 1.2163

Current trend

The British pound is trading on the downside, breaking new March 2020 all-time lows and testing 1.1860 for a breakdown in anticipation of new market drivers. On Wednesday, the May statistics on the dynamics of GDP and Industrial Production will be published in the United Kingdom, which probably will not provide significant support to the national currency.

The UK economy is rapidly plunging into recession, which could be exacerbated by the political crisis at home in connection with Boris Johnson, who announced his resignation as Prime Minister last week under pressure from his party members and mass layoffs in the government. At least 50 officials left their posts. Among them are the closest associates of the former Head of the Conservative Party, for example, Chancellor of the Exchequer Rishi Sunak, who accused Boris Johnson of incompetence. Now investors are assessing how the resignation may affect the national economy and the development of international relations. It is noted that already 11 people are running for the post of Prime Minister. The Head of the Ministry of Foreign Affairs, Liz Truss, also announced her intention to take part in the election campaign. If elected, the official intends to significantly cut taxes for large corporations, stop the growth of national insurance rates and reform them for business.

It is not entirely clear what could provide additional support to the pound and, apparently, the Bank of England is not at all concerned about the low rate of the national currency. The regulator is much more concerned about the problem of high inflation, so one should expect further tightening of monetary policy, even at the cost of a recession in the national economy.

Support and resistance

Bollinger Bands in D1 chart demonstrate quite active decrease. The price range expands from below, making way for new local lows for the "bears". MACD is declining keeping a weak sell signal (located below the signal line). Stochastic keeps a downtrend but is located near its lows, which indicates the risks of oversold pound in the ultra-short term.

Resistance levels: 1.1933, 1.2000, 1.2074, 1.2163.

Support levels: 1.1854, 1.1800, 1.1700, 1.1650.

Trading tips

Short positions may be opened after a breakdown of 1.1854 with the target at 1.1700. Stop-loss — 1.1933. Implementation time: 1-2 days.

A rebound from 1.1854 as from support followed by a breakout of 1.1933 may become a signal for opening new long positions with the target at 1.2074. Stop-loss — 1.1854.