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Pound Renews 2020 Lows

8/29/2022 12:01 PM

The British pound is trading down, building on the "bearish" momentum that was formed last Friday. The GBP/USD pair is making new 40-year lows, testing 1.1650 for a breakdown, below which the instrument last traded in March 2020.

The pound, like many other risky assets, is reacting to a noticeable strengthening of the US currency after the "hawkish" comments of the Chair of the US Federal Reserve, Jerome Powell, who spoke in favor of further raising interest rates at a record pace. The official urged to maintain a tight monetary policy, seeking to bring under control the high inflation rates that are still observed in the US economy. Thus, traders have revised their forecasts for the September meeting of the regulator: at the moment, most analysts expect a 75 basis point increase in interest rates, while earlier the chances of adjusting the value by 50 basis points and 75 basis points were estimated to be about the same.

Meanwhile, the pound remains under pressure amid record inflation in the EU and the UK due to a sharp rise in energy prices. Ahead of the cold weather and the beginning of the heating season, politicians are already trying to prepare their voters for an increase in tariffs for heat and electricity. Last Friday, the Office of Gas and Electricity Markets of the United Kingdom (Ofgem) reported that in October, electricity bills will increase by 80%, adding 1.86 thousand dollars against the background of the escalation of the military conflict in Eastern Europe and, as a result, record growth of gas prices. Moreover, experts are sure that the price correction is not final, and already in April 2023 they can rise again and reach 7.7 thousand dollars per year.

Bollinger Bands in D1 chart demonstrate active decrease. The price range is expanding, making way to new record lows for the "bears". MACD is going down, keeping a fairly stable sell signal (located below the signal line). Stochastic, after a short rise last week, is once again reversing downwards, approaching its lows and indicating the risks of the pound being oversold in the ultra-short term.

Resistance levels: 1.1700, 1.1758, 1.1800, 1.1854. | Support levels: 1.1647, 1.1600, 1.1531, 1.1470.

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