GBP: Who killed the Great British Pound?
GBP reaching 10-year lows!
The Great British pound is failing to live up to its name in recent months and weeks and on Friday took another turn for the worse as on the back of weak gross domestic product data which saw the UK economy shrink within the last quarter, its value decreased yet again against its main peers falling to 1.2022 against the USD and 1.063 against the EURO.
Not good news for any British holiday makers in the month of August, increasing the cost of holiday expenses and spending, coupled with exchange rate costs will give you no value for money for the GBP.
The economy contracted by 0.2% during the second quarter of 2019 as we learnt on Friday morning. The market did not react largely immediately but with the words of possible UK “recession” being thrown around within the mainstream media it seems panic set in and the pound could no longer sustain any bids to push higher as we broke daily support at 1.2080 and nose-dived towards the next Monthly key level coming in at 1.2000.
The poor data on Friday along with the continued Brexit worries and fears that show no hope of being resolved or agreed anytime soon reinforced the belief in short sellers, increasing their bets and holding for the long haul as a pound recovery does not look likely any time soon, but will this continue to be the case going into next week? The pound its heavily sold at the moment and has had a huge three week decline of 500 points / pips. Can the pound sustain such a beating and push even lower? With more UK data scheduled for Tuesday and Wednesday of CPI data and retail sales to show more insight on the current status of the economy we can either see a foot put on the head of the GBP whilst currently drowning under water or see the pound push its head above water for a breather, but the question is for how long…
We will be monitoring the pound closely this week. The immediate support is the critical monthly key level of 1.2000 which we should find tough to break and if we have some good data released it may just give GBP some breathing space and allow for a 100-200 PIP upside rally back to 1.2250. Trading between these two key levels we may see some consolation between this area over the coming week/weeks until another big move can be determined.
We have started the week with a stronger GBP as we have now pushed back towards the daily support now acting as resistance at 1.2080 where price was supported until the sell of last Friday. This will be a good test for the early bulls to see how strong they are but should we break and close above this level, 1.2250 is easily achievable once again. Any weakness needs to be monitored as overall the GBP is treading on thin ice and could collapse further to take out 1.2000.