GBP/USD slumps to fresh three-week low below 1.2400

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  • GBP/USD witnessed strong selling for the third day in a row amid broad dollar strength.
  • The strength of the CPI for May in the US reaffirmed the expectations of the Federal Reserve and boosted the USD.
  • The risk aversion momentum reinforced the dollar as a haven and put pressure on the pair.

The pair GBP/USD extended its rejection drop this week from the 1.2600 area and witnessed a follow up sell-off for the third day in a row on Friday. Intraday selling accelerated during the early American session and dragged the pair to three-week lows below 1.2400.

The US dollar added to its intraday gains and soared to the highest level since May 19, in reaction to stronger-than-expected US consumer inflation figures. Indeed, the US headline CPI rose 1.0% mom in May, vs. 0.7% expected, and the annual rate jumped to a new 40-year high of 8.6%. Additionally, core inflation, which excludes food and energy prices, rose 0.6% mom and 6.0% mom, beating consensus estimates of a 0.5% and 5.9% reading, respectively.

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The data raised bets for a more aggressive tightening of the Federal Reserve’s monetary policy, which was reflected in a strong rebound in shorter-dated US bond yields. In addition, markets are pricing in a 50 basis point rate hike at each of the June, July and September meetings. This, coupled with the worsening global economic outlook, triggered a new wave of risk aversion globally, which further benefited the safe-haven dollar and contributed to the heavily bid tone surrounding the GBP/USD pair.

From a technical point of view, the intraday break of the previous weekly low around the 1.2430 area was seen as a new trigger for bearish traders. The subsequent drop and acceptance below 1.2400 could have already set the stage for further losses towards the 1.2330-1.2325 support. The bearish trajectory could extend further towards the 1.2300 round figure heading towards the 1.2240 area before GBP/USD finally drops below 1.2200 levels.

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Technical levels

GBP/USD

Panorama
Last Price Today 1,234
Today’s Daily Change -0.0154
Today’s Daily Change % -1.23
Today’s Daily Opening 1.2494
Trends
20 Daily SMA 1.2512
50 Daily SMA 1.2666
100 Daily SMA 1.3011
200 Daily SMA 1.3279
levels
Previous Daily High 1.2558
Previous Daily Minimum 1.2487
Previous Maximum Weekly 1,266
Previous Weekly Minimum 1.2458
Monthly Prior Maximum 1.2667
Previous Monthly Minimum 1.2155
Daily Fibonacci 38.2% 1.2514
Daily Fibonacci 61.8% 1.2531
Daily Pivot Point S1 1.2468
Daily Pivot Point S2 1.2442
Daily Pivot Point S3 1.2397
Daily Pivot Point R1 1.2539
Daily Pivot Point R2 1.2584
Daily Pivot Point R3 1,261

Source: Fx Street

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