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GBPUSD, Market Update

7/7/2022 1:26 PM

Current trend

The British pound is trading on the upside, trying to correct after a strong decline in the last two trading sessions, as a result of which GBP/USD fell below 1.2000 and hit March 2020 record lows. The pound rises against the backdrop of rising corrective sentiment on the US currency, as investors prefer to close some of their long positions before the publication of the ADP report on private sector employment in June.

In addition, today there will be a number of speeches by US Federal Reserve officials such as James Bullard and Christopher Waller. Traders hope to receive evidence of further tightening of monetary policy by the regulator, since recently there has been more and more talk of easing the position amid the risks of a recession in the national economy. Representatives of the Bank of England will also speak today, which is likely to bring some clarity to the plans of the British regulator.

In turn, in the UK, it seems that another political crisis is brewing. Barely weeks after the Prime Minister received a vote of confidence, Finance Minister Rishi Sunak, Health Minister Sajid Javid and several others resigned from serving under Boris Johnson. Previously, the politician was accused of violating quarantine rules, and his former deputy Christopher Pincher of sexual harassment, which led to new calls for the Prime Minister to step down. Boris Johnson said that he was not going to leave the post, which, in turn, could negatively affect the position of the Conservative Party in the upcoming parliamentary elections, as well as put significant pressure on the quotes of the national currency in the near future. Nadhim Zahawi, who previously worked in the Ministry of Education, was appointed as the new British finance minister.

Support and resistance

Bollinger Bands in D1 chart demonstrate a moderate decrease. The price range is expanding, but it fails to keep pace with the "bearish" activity of recent days. MACD is going down, keeping a fairly stable sell signal (located below the signal line). Stochastic is showing similar dynamics; however, the indicator line is rapidly approaching its lows, indicating the risks of GBP being oversold in the ultra-short term.

Resistance levels: 1.2000, 1.2074, 1.2163, 1.2236.

Support levels: 1.1874, 1.1800, 1.1700, 1.1600.

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