GBPUSD Breaks Lower
As we wrap another week (and it’s been a wild and wintery week here in London), it’s time once again to take a look at the action over the week. There’s been plenty to focus on this week, with no shortage of moves across the markets.
However, the big focus heading into the weekend is all on the moves we’ve seen across the board in GBP and with USD seeing a firm rally across the week also, it seems the trade capturing the most attention this Friday is the almost 2.5% slide in GBPUSD. So, let’s take a look at what caused the move and, as ever; if you caught this trade? Well-done! If not? There’s always next week.
What Caused the Move?
It turned out to be the perfect storm for GBPUSD this week with a combination of downside GBP factors and upside USD factors driving the breakdown to the pair’s lowest levels since December 2020.
Energy Crisis & Furlough Ending
Starting on the GBP front, there has been plenty weighing on the UK currency this week. The escalating energy crisis and supply chain issues impacting the economy have exacerbated investor uncertainty towards the UK. The fuel shortage has been met this week by the UK PM ordering the army to become involved in distributing fuel as more and more petrol stations go empty and energy prices continue to rise as suppliers and distributors falter. This has come at the same time as the government’s furlough scheme comes to an end and universal credit (unemployment support) is due to be cut, raising fears over the near-term economic prospects for the UK.
Hawkish Fed Comments Boost USD
On the USD side, the Dollar has been higher this week in response to a slew of hawkish comments from Fed member and safe-haven inflows. An increasing number of policymakers are now voicing their view that tapering is likely to happen soon, a sentiment echoed by Fed chair Powell this week. With this in mind, the greenback has been well bid across the week and looks set to remain in favour next week also. So, let’s take a look at the technical picture now.
Technical Views
GBPUSD
The sell off in GBPUSD has seen the market breaking down out of the contracting triangle pattern and below several key support levels. In the near term, while the market remains below the 1.3570 level, the focus is on a continued push lower towards the deeper 1.32 target, in line with bearish indicator readings.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Futures and Options: Trading futures and options on margin carries a high degree of risk and may result in losses exceeding your initial investment. These products are not suitable for all investors. Ensure you fully understand the risks and take appropriate care to manage your risk.
With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.