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The Pound Remains Under Pressure

10/12/2022 11:48 AM

During the Asian session, the GBP/USD pair shows a poor upward trend, consolidating near 1.1000. Yesterday, the pound was actively losing value against the background of the actions of the Bank of England, aimed at expanding the volume of purchases of government bonds, although, during the day, the "bulls" attempted to restore lost positions.

The agency intends to double the purchase of government bonds to 10.0B pounds from 5.0B previously to prevent possible risks of imbalance in the national financial market due to significant asset sales by the country's pension funds, which are trying to create sufficient liquidity for themselves against the backdrop of a general decline in the securities sector. The current situation was initially provoked by the government's actions, led by the new Prime Minister Liz Truss, who decided to introduce 45.0B pounds in unfunded tax breaks. Also, the Bank of England announced that it would switch to a series of regular lending operations after the last bond auction at the end of this week, which, according to officials, will somewhat compensate for high inflation and the rapid depreciation of the national currency.

On Wednesday, investors will focus on a block of macroeconomic statistics on the dynamics of gross domestic product (GDP) and industrial production volumes. Current forecasts suggest that the UK economy will show zero dynamics in August after rising by 0.2% last month, and industrial production may decline by 0.2% after falling by 0.3% MoM earlier and from 1.1 % to 0.6% YoY. Also during the day, the publication of the latest minutes of the Bank of England meeting is expected, which may help assess the prospects for further tightening of monetary policy by the British regulator:

On the daily chart, Bollinger bands reverse into a horizontal plane: the price range remains almost unchanged but remains quite spacious for the current market activity level. The MACD indicator is going downwards, keeping a strong sell signal (the histogram is below the signal line). Stochastic, having reached its lows, is trying to reverse upwards, indicating that the pound may become oversold in the ultra-short term.

Resistance levels: 1.1060, 1.1210, 1.1300, 1.1404. | Support levels: 1.0836, 1.0600, 1.0450, 1.0274.

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