GBP/USD keeps falling below 1.2000

• Markets are risk averse and that is sending the GBP below 1.2000.
• GBP/USD is breaking a roll which is significant.
• A 100% measured move of the range will target the previous structure at 1.1900.

At the time of writing these lines, the GBP/USD is down 0.9%, falling to a low of 1.1976 from a high of 1.2111. Risk currencies such as sterling are under pressure as protests against COVID restrictions in China have weighed on market sentiment.

GBP/USD is dipping below the psychological 1.2000 level and is encountering short-term dynamic support. In addition, fears of a prolonged UK recession weighed on sentiment. Investors are waiting to see what the next move from the Bank of England (BoE) will be. Several BoE members will speak this week, including BoE Governor Andrew Bailey on Tuesday and Chief Economist Huw Pill on Wednesday.

The Old Lady has tried to combat rising inflation without damaging the economy too much in the process. “Inflation pressures will remain high through 2023, forcing the Bank of England to make further increases,” Danske Bank analysts explain. “However, we see the maximum rate well below market prices and we expect the first cut to occur during 2024.”

Listening ears to Fed spokespeople

Meanwhile, speakers from the Federal Reserve will be key this week. On Monday, Federal Reserve Bank of New York President John Williams said he believes the Fed will have to raise rates tight enough to push inflation down, and keep them there for the rest of the year. next year:

“I think we’re going to need to keep policy tight for a while; I would expect that to continue at least into next year,” Williams said at a virtual event held by the Economic Club of New York, adding that he did not expect a recession.

James “Jim” Bullard, president and CEO of the Federal Reserve Bank of St. Louis, has said that rates must rise to reduce inflation. “We have a way to go to be restrictive in politics.” He also said that the Fed will ”have to keep rates at a sufficiently high level through 2023 and through 2024.”

GBP/USD Technical Analysis

The bears move into the support of the trend line. However, a correction could occur first, as illustrated in the hourly chart above. However, price is coming out of a spiral and a measured move to 100% of the range will target the previous structure at 1.1900 and then a measured move to 200% aligns with 1.1800.