GBP/USD falls towards 1.3550, below the 21 DMA on risk-off flows and disappointing UK data

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  • GBP/USD has fallen to fresh weekly lows at 1.3550 and is now below its 21 DMA.
  • Dovish global risk appetite and weak UK data weighed on the pair on Friday.

The GBP/USD reached new weekly lows on Friday and has continued to push lower as the US trading session has started, with sterling succumbing to weak data and risk aversion flows weighing heavily on G10 currencies. risk sensitive. At current levels, just above 1.3550, the GBP/USD it is now trading around 0.3% lower on the day, assuming losses for the week around 0.9%. With the latest drop taking the pair back below the 21-day moving average for the first time since last month, sterling bulls will be concerned that GBP’s short-term momentum has turned negative. The main support area for pound traders to watch now is at 1.3500.

Global stocks fell on the last trading day of the week with traders citing the usual Fed tightening concerns as well as Netflix’s weekly earnings, and this has dragged down other risky assets (such as commodities). premiums) and tandem bond yields. This has affected sentiment towards the more risk-sensitive currencies in the G10, such as the British pound, which has also suffered after a larger-than-expected drop in retail sales in December. Data released by the UK ONS on Friday showed overall retail sales fell 3.7% mom, beating expectations for a 0.6% mom decline.

“December’s retail sales report is unequivocally bad news, and it’s reasonably clear that high price pressures in the goods sector contributed to lower spending,” the BMO analysts said. Meanwhile, if next week’s Fed meeting meets or exceeds expectations regarding the aggressive line, that could be a recipe for overall USD strength and further losses for the Pound. A drop back to 1.3400, where the 50 DMA resides, is looking more and more on the cards. Markets continue to price in a high probability that the BoE will raise interest rates again at its next meeting, and the BoE spoke this week doing nothing to curb such speculation, but the next meeting isn’t until February 3 (just under two weeks).

Additional technical levels

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