The Pound Is Losing Momentum

The Pound Sterling continues to fall against the USD on Monday; the instrument mostly trades at 1.2117.

First of all, the Pound has received significant pressure from the USD, which has almost improved a lot recently. Second, statistics released by the UK last week showed that inflation had a severe impact on key macroeconomic parameters.

For example, Industrial Production lost 0.9% m/m in June after adding 1.3% m/m the month before and against the expected reading of -1.3% m/m. The fact that the actual reading is better than the forecast is not comforting at all: the indicator is decreasing, and this decrease is caused by inflation acceleration. Manufacturing Production and Construction Output also fell. The preliminary report on GDP for the second quarter showed -0.1% q/q after being +0.8% q/q the quarter before.

It is still quite unclear how much the global price increase could hurt the UK economy. However, it will be hurt, there is no doubt about it.

As we can see in the H4 chart, after ending the upward momentum at 1.2256, GBP/USD forms a new descending structure to 1.1990. Later, the market can start another rise to reach 1.2311 and then resume trading down with the target at 1.1990, or even extend this structure down to 1.1890. From the technical point of view, this scenario is confirmed by the MACD Oscillator: its signal line is moving down outside the histogram area and may soon reach new lows.

In the H1 chart, having completed the downward structure at 1.2133, GBP/USD is consolidating above this level. If later the price breaks this range to the top, the market can grow to 1.2190, and then start a new decline with the goal at 1.1990; if to the downside – resume falling to reach the above-mentioned target, and then form one more ascending wave to 1.2311. From the technical point of view, this scenario is confirmed by the Stochastic Oscillator: after breaking 50, its signal line falls to reach 20.