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The Pound Retreats from Local Highs

8/12/2022 12:54 PM

The British pound is trading with mixed dynamics, trying to consolidate below 1.2200. The instrument is slowly retreating from its local highs, updated on August 10, when inflation data put pressure on the US dollar.

The Consumer Price Index retreated from the peak at 9.1%, in July showing an increase of only 8.5%, while the average forecast suggested an increase of 8.7%. Such statistics have led to speculation that the US Federal Reserve will ease pressure and raise interest rates by only 50 basis points instead of 75 basis points during its September meeting. Later, however, representatives of the regulator noted that it was somewhat premature to talk about victory over record inflation, and the situation remains quite complicated.

Market activity remains rather low today. Investors are waiting for the publication of a block of macroeconomic statistics from the UK, while continuing to evaluate the interim results of the election campaign of candidates for the post of Prime Minister of the United Kingdom. In particular, the media criticized the ideas of Liz Truss about revising the main guidelines in the issue of monetary policy correction. Now the Bank of England, like many other leading world financial regulators, sets a target inflation rate in the range of 2-3%. Truss, laying the responsibility for the current crisis on the members of the regulator, proposes to revise part of the powers of the Bank of England, as well as to set a new target for the money supply.

Bollinger Bands in D1 chart show moderate growth. The price range is narrowing from below, reflecting the emergence of ambiguous dynamics of trading in the short term. MACD is growing preserving a weak buy signal (located above the signal line). Stochastic keeps its upward direction but is rapidly approaching its highs, which reflects the risks of overbought instrument in the ultra-short term.

Resistance levels: 1.2236, 1.2292, 1.2400, 1.2457. | Support levels: 1.2176, 1.2133, 1.2054, 1.2000.

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