GBP/USD outlook: Growing recession fears fuel downside risk

Slobodan Drvenica Windsor Brokers

GBP/USD

Cable kept weak tone in European session on Friday and fell to one week low after quite mild reaction on BoE’s 50 basis points rate hike on Thursday, as the pair traded in a choppy mode after rate decision, but the action stayed capped under key barriers (200WMA/monthly cloud base), keeping bearish pressure.

Dips were limited by slightly better than expected UK retail sales in May, but the sentiment was again soured by UK PMI data, which came below forecasts in June.

Technical studies on daily chart are weaker but still bullish overall, with growing pressure seen from expectations that the UK economy could slide into recession after BoE’s jumbo hike on Thursday, which could drive the pound lower.

Fresh extension lower broke through pivotal support at 1.2720 (Fibo 23.6% of 1.2307/1.2848, reinforced by rising 10DMA), which so far resisted three consecutive attacks, with firm break here to add to initial reversal signal and risk deeper pullback.

Caution on repeated failure to clearly break below 10DMA, which would keep the price action in extended consolidation, but biased lower as long as it stays below 200WMA.

Res: 1.2758; 1.2806; 1.2848; 1.2875.
Sup: 1.2683; 1.2641; 1.2578; 1.2534.

Interested in GBP/USD technicals? Check out the key levels

1. R3 1.2939
2. R2 1.2892
3. R1 1.282
PP 1.2773
1. S1 1.2701
2. S2 1.2654
3. S3 1.2581

Author

Slobodan Drvenica

Windsor Brokers

Industry veteran with over 22 years’ experience, Slobodan Drvenica joined Windsor Brokers in 1995 when he was an active trader for more than 10 years, managing the trading desk and own account departments.

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