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Pound is Consolidating Near Local Highs

1/27/2023 10:48 AM

The GBP/USD pair is trading in different directions, holding near the June local highs, updated at the beginning of the week. The instrument is at the level of 1.2400; however, after the release of the American macroeconomic statistics the day before, "bearish" sentiment clearly prevails on the market.

In particular, investors are assessing the dynamics of the US Gross Domestic Product (GDP) for the fourth quarter of 2022: the economy slowed down from 3.2% to 2.9% as expected, while the forecast was 2.6%. This strengthens the position of the US Federal Reserve ahead of the first meeting on monetary policy this year, which will be held next week. It is possible that against the backdrop of a fairly stable economy, the regulator may raise interest rates by 50 basis points, but the most likely scenario is still an increment of 25 basis points. Additional support for the US currency was provided by data on the dynamics of Durable Goods Orders, the volume of which in December added 5.6% after falling by 1.7% in the previous month, while analysts expected an adjustment of only 2.5%. Excluding defense orders, the figure rose by 6.3% after falling by 2.3% in November, with a weak negative trend forecast to remain at the level of -0.1%.

Meanwhile, the British economy remains under pressure. According to statistics from the Office for National Statistics (ONS), government borrowing last month was 16.7 billion pounds higher than in 2021, driven by a sharp increase in compensation for higher electricity tariffs for households and companies, as well as an increase in liabilities on public debt to 17.3 billion pounds. In addition, by the end of last year, the United Kingdom's net public debt ratio in terms of Gross Domestic Product (GDP) reached 2503.6 billion pounds, and the budget deficit was 27.4 billion pounds.

Bollinger Bands in D1 chart show moderate growth. The price range expands slightly, freeing a path to new local highs for the "bulls". MACD indicator tries to reverse downwards and to form a new sell signal (the histogram is about to consolidate below the signal line). Stochastic, which showed a decline at the beginning of the week, reversed upwards, again approaching its highs and indicating the risks of the pound being overbought in the ultra-short term.

Resistance levels: 1.2400, 1.2500, 1.2600, 1.2700. | Support levels: 1.2311, 1.2240, 1.2150, 1.2084.

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