British Pound Weekly Outlook: Distressed GBP On The Backfoot Ahead Of Next Week's Key Data
Date
10/7/2022 5:11:35 PM
(MENAFN- DailyFX) POUND STERLING ANALYSIS TALKING POINTS
- U.S. print keeps depressed.
- UK labor data and U.S. inflation direct the economic calendar next week.
- Long upper wick adds to GBP woes – weekly chart.
GBP/USD FUNDAMENTAL FORECAST: BEARISH
The slipped on Friday after stronger than expected data retracing most of its weekly gains. This has added pressure on GBP considering the fragile state of UK fiscal policy measures. While the UK government attempts to stabilize bond markets after Chancellor Kwasi Kwarteng's tax cut announcement, sterling continues its bearish trajectory. The UK housing market is another area of concern with declining prices likely to accelerate as rise resulting in lesser demand.
Next week puts the UK labor market under the spotlight which has shown a trend of both unemployment and employment decreasing month-on-month. Wage growth will be a key metric to monitor from the release while the U.S. economic calendar will focus on . Headline inflation (including food and energy) is set to fall mostly due to a slump in (September) with core projected to match 2022 highs in March.
ECONOMIC CALENDAR
Source:
From a perspective the ' pivot' is unlikely after such stellar labor data so the fundamental setting currently favors the greenback.
TECHNICAL ANALYSIS
WEEKLY CHART
Chart prepared by , IG
Weekly GBP/ is producing a candle (yellow) which is traditionally linked with subsequent downside – should the candle close in this fashion. This echoes the fundamental backdrop above and could bring the 1.1000 into question soon.
DAILY CHART
Chart prepared by , IG
Dialing into the short-term daily chart, a confirmation close below 1.1000 may spark further selling towards the 1.0324 swing low. The ) has now dipped below the midpoint 50 level indicative of an increase in bearish momentum leaving little in the way of bullish support from a technical standpoint.
Key resistance levels:
- 100-day EMA (yellow)
- 1.1500/50-day EMA (blue)
- 20-day (purple)
Key support levels:
MIXED IG CLIENT SENTIMENT
Data (IGCS) shows retail traders are currently 57% LONG on (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment but due to recent changes in long and short positioning, we arrive at a short-term cautious bias.
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