GBP/USD Technical Analysis: End to Recent Bullish Attempts – 16 March 2023
After four bullish trading sessions, in which the price of the GBP/USD currency pair moved towards the resistance level 1.2204, it was subjected to profit-taking sales. We often mention about the possibility of this occurrence at any time, as the pound is still waiting for bleak expectations for the future of the British economic recovery and the future of the British policy.
Selling operations moved the pound / dollar towards the support level of 1.2010, before settling around the level of 1.2060 at the time of writing the analysis.
Amidst the uproar about US banking performance and the future of US Federal Reserve policy, there will be some giveaways in the British budget for the year 2023, but “there is no helping hand for the pound sterling,”. Accordingly, experts at Barclays Bank say, because they judge the size of any financial increase that will not prompt the Bank of England to take a more proactive stance on interest rates.
The budget marks the second major domestic event of the week for the pound, which has risen against the euro and dollar since Monday, supported by some stronger-than-expected jobs numbers on Tuesday and the evolving market reaction to the collapse of Silicon Valley Bank (SVB) in the United States.
UK Chancellor Jeremy Hunt is expected to announce an improvement in the financial outlook and it is estimated that he will have an extra ?30 billion to spend, which could boost the UK economy and sentiment among consumers and businesses. The 2023 budget follows on the heels of a brilliant September ‘mini budget’ by Les Truss and Kwasi Quarting that sent the pound lower and served as a reminder that these events can still have an impact on the forex markets.
Meanwhile, Hunt’s financial statement issued on November 17 succeeded in restoring the financial credibility of the United Kingdom, and the exchange rate of the pound against the dollar increased by 17% since its lowest levels in September 2022. Meanwhile, the exchange rate of the pound against the euro recovered by 4.5% from its lowest its levels.
For his part, analysts at Morgan Stanley say that any impact on the pound will depend on the mix of announced initiatives.
“We don’t think the spring budget statement will be a game-changer for the pound, but announcing more supply-side initiatives could bring more near-term support to the currency,” says Wanting Low, FX analyst at Morgan Stanley.
Hunt will be keen to boost the supply potential of the economy by supporting business investment and the supply of labour, particularly given the UK’s labor shortage since the pandemic. Rumors that childcare and pension reforms and back-to-work plans will boost supply if they succeed in putting mothers, older workers and long-term patients back to work.
The British budget comes amid diminishing expectations regarding the volume of interest rate hikes in the Bank of England in the future, and this was greatly helped by the guidance of the Governor of the Bank of England, Andrew Bailey, which indicated the approaching end of the cycle. However, expectations of a halt on March 23 were bolstered by the SVB collapse, which saw investors betting that the Federal Reserve would leave interest rates on hold on March 22.
The price of the GBP/USD pair moved towards the psychological support level 1.2000.This will reaffirm the bears’ control over the trend, and thus prepare to move towards stronger support levels.The closest to them after that 1.1920 and 1.1800, respectively, and moving towards the last level may cause technical indicators to start moving towards oversold levels.
On the other hand, and for the same time period, the return to the resistance level of 1.2200 will be important for the bulls to control the direction. I still prefer selling the Sterling / Dollar from every ascending level. Today’s economic calendar is devoid of important British economic releases, and the focus will be on the rest of the important US economic data, the weekly jobless claims, the Philadelphia Industrial Index, and the US housing market figures.
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