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The Pound is Under Pressure from Poor Macroeconomic Data

8/23/2022 3:13 PM

This week, the GBP/USD pair continued to decline and today tested 1.1718 (Murrey [0/8]).

The pressure on the pound is exerted by poor preliminary PMI data in the British economy. In the industrial sector, the indicator corrected from 52.1 points to 46.0 points and found itself in a stagnation zone for the first time since May 2020 against the backdrop of lower consumer demand, a shortage of personnel, and instability since supplies of components and energy carriers. According to experts, these reasons will lead to a further slowdown in the sector in the coming months. Services are also slowing down, dropping from 52.6 to 52.5 as inflation continues to rise sharply, forcing citizens to lower spending levels, while the Composite PMI hit 50.9 from 52.1. point earlier, which increases the risks of a recession, the onset of which the Bank of England predicts by the end of this year.

The dollar looks more attractive to invest in the current environment, and the US economy seems more resilient than the British economy, as it is supported by a strong labor market, although the construction industry is beginning to experience serious problems. The tightening of the monetary policy of the US Federal Reserve also has a positive effect on the currency. At the end of the week, investors are looking forward to the speech of the head of the regulator, Jerome Powell, at a symposium in Jackson Hole, where he is likely to confirm the need for further interest rate hikes and possibly hint at its pace.

The trading instrument is testing 1.1718 (Murrey [0/8]), the breakdown of which will give the prospect of further decline to 1.1596 (Murrey [–1/8]), 1.1474 (Murrey [–2/8]). The key “bullish” level is 1.1962 (Murrey [2/8]). Its breakout allows the price to return to 1.2085 (Murrey [3/8], the middle line of Bollinger bands) or 1.2207 (Murrey [4/8]).

Technical indicators point to a further decline: Bollinger bands reverse downwards, the MACD histogram is increasing in the negative zone, and Stochastic is pointing downwards but has entered the oversold zone.

Resistance levels: 1.1962, 1.2085, 1.2207, 1.2330. | Support levels: 1.1718, 1.1596, 1.1474.

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