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GBPUSD Monetary Factors Support Asset Positions

12/8/2022 1:51 PM

The GBP/USD pair continues to trade within the mid-term upward trend, but this week it attempted a downward correction and is currently trading around 1.2207 (Murray level [+1/8]).

The pressure on the pound was associated with the release of weak business activity data. Recall that the indicator for the service sector remained at 48.8 points, and for the construction sector – decreased from 53.2 points to 50.4 points and was on the border of the stagnation zone. This indicates an increase in the risks of recession in the British economy, which generally coincides with the statements of the Bank of England, which predicted its beginning at the end of the year. Both of these sectors of the economy are under serious pressure from unprecedented inflation. In the construction market, there is a rejection of already concluded deals and a drop in demand for real estate, accompanied by a significant decrease in prices (in November by 2.3%), and the services sector is negatively affected by a drop in the purchasing power of households and their transition to savings.

Nevertheless, the current dynamics may turn out to be temporary, since the rhetoric of the American regulator provides general support for the GBP/USD pair. The US Fed announced a reduction in the pace of interest rate hikes at its December meeting, which contributes to the greater popularity among investors of assets alternative to the US currency. The strong November data from the US labor market made experts doubt the relevance of such actions of the department, however, most of them still believe that officials will still increase the rate by 50.0 basis percentage points, and not by 75.0 basis percentage points, as it was earlier, since the value is already 4.0% with an expected peak of 5.0%.

In general, monetary factors are likely to remain dominant in the near future and will support the upward trend in the GBP/USD pair.  

Technically, the price is testing the mark of 1.2207 (Murray level [+1/8]), consolidation above which will give the prospect of continued growth to the levels of 1.2425 (Fibo retracement 50.0%), 1.2700 (Murray level [+2/8]). The key for the "bears" is the level of 1.2020 (the middle line of the Bollinger Bands, Fibo retracement 23.6%), if consolidated below it, the decline can continue to the area of 1.1718 (Murray level [6/8]) and 1.1500 (Fibo retracement 23.6%).

Technical indicators do not give a single signal: the Bollinger Bands are directed upwards, confirming the continuation of the upward trend, the MACD histogram is stable in the positive zone, but the Stochastic is directed downwards.      

Resistance levels: 1.2207, 1.2425, 1.2700. 

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