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Pound-ed GBP/USD remains under pressure

Fawad Razaqzada Fawad Razaqzada 30/09/2021
Pound-ed GBP/USD remains under pressure Pound-ed GBP/USD remains under pressure
Pound-ed GBP/USD remains under pressure Fawad Razaqzada
The pound was able to find some love from favourably revised growth figures this morning after getting an absolute pounding in the last couple of days. The GBP/USD, which has been among the hardest hit pound crosses, owning to the simultaneous upsurge for the US dollar, managed to get eke out a small gain. But given the warning about future growth from Andrew Bailey, Bank of England Governor, the dollar’s strengthening momentum, and the technical damage the cable has incurred in the last few days, the risks remain skewed to the downside in the short-term outlook.
 
The GBP/USD slumped in the previous two sessions after Mr Bailey said that the supply chain crisis risks derailing UK's economic recovery until next year. However, revised data released this morning showed the economy had actually bounced back faster than previously thought. GDP grew 5.5% in the second quarter as it emerged from the winter lockdown. This was sharply better than 4.8% reported initially and expected.
 
But that was the past. What matters is the future. Judging by this week’s sharp selling, investors are no longer confident that the economy is on a sustainable path of recovery and that it is facing stagflation risks. Bailey’s remarks implies that the BoE will not aggressively tighten its belt. Although inflationary pressures are increasing sharply – with UK gas futures exceeding £2.50 per British thermal units to hit a fresh record today – Bailey’s warning that the UK economy is facing strong headwinds because the services sector has not recovered as strongly as had been expected means any rate hikes would be done so for the “wrong” reasons. That is, to prevent very high levels of inflation derived from energy prices spikes and temporary factors, rather than because of growth warranting tighter policy.
 
Because of that, that pound selling is probably not done just yet. This week’s selling has been exacerbated by the fact key support in the $1.36 area broke, which gave rise to momentum selling and long covering below this hurdle. The next line of defence around 1.35 hurdle also broke down. So the area between 1.35 to 1.36 (shaded) is going to be a major hurdle going forward. For as long as rates hold below that area, the path of least resistance would remain to the downside. Any fresh selling pressure is likely to send the cable towards the support trend of the bearish channel around 1.3350 next, with the long-term 38.2% Fibonacci level at 1.3167 being the next major downside target.
 
GBPUSD
Source: ThinkMarkets and TradingView.com
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.

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Meet our contributors
Fawad Razaqzada
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Fawad Razaqzada
Market Analyst, London

Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms. He leverages years of market knowledge to provide retail and professional traders worldwide with succinct fundamental & technical analysis. Fawad also offers trading education to help shorten the learning curves of developing traders.
 
His colleagues consider him an expert at reading price action on the charts. This together with his deep understanding of economics and fundamental analysis, and trading experience, puts him in a great position to forecast short term price movements. Fawad covers a wide range of markets, including FX, commodities, stock indices and cryptocurrencies and his comments are regularly quoted by the leading financial publications such as Reuters and Market Watch. In addition to ThinkMarkets, Fawad also provides analysis and premium trade signals on his own website at TradingCandles.com.
 
 

Carl Capolingua
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Carl Capolingua
Market Analyst, Melbourne

Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions. Specialising in Australian and US stock markets in particular, Carl uses a top-down approach to assess the global macro picture before using both technical and fundamental techniques to select stocks. He regularly appears as an expert commentator on a number of media outlets throughout the Asia-Pacific region.
 
 
 

Kearabilwe
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Kearabilwe Nonyana
Market Analyst, South Africa

Kearabilwe is an experienced Sales trader and Analyst specialising in Equity and Equity derivatives. His career in the financial markets has seen him hold various positions in global investment banks and global CFD and Spread betting firms. He has deep interest in using quantitative methods to help him understand and teach the fundamental drivers of asset prices.
 
 
 

Fawad Razaqzada
Fawad Razaqzada
Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms.
Carl Capolingua
Carl Capolingua
Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions.
Kearabilwe
Kearabilwe Nonyana
Kearabilwe is an experienced Sales trader and Analyst specialising in Equity and Equity derivatives.

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Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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