GBP/USD Analysis: Sterling’s collapse not over yet

Valeria Bednarik FXStreet

GBP/USD Current Price: 1.2028

The UK will release employment and inflation data this week.
Speculation mounts about a UK election early November.
GBP/USD to accelerate its slump on a break below 1.2020.

The British Pound collapsed on Friday, with the GBP/USD pair closing down for a fourth consecutive week just above a daily low of 1.2022. Trading at levels last seen in January 2017, Sterling was sold-off following the release of dismal UK data, as the preliminary estimate of Q2 GDP came in at -0.2%, worse than the flat reading expected. Also, Industrial Production fell in June by 0.1% MoM and by 0.6% YoY, while Manufacturing Production decreased by 0.2% MoM and by 1.4% YoY. Meanwhile, speculation mounts about a possible election in the UK, although it would be after the UK leaves the Union. PM Johnson is determined to leave on October 31 with or without a deal, while MPs will have to rush to try blocking a hard-Brexit when returning in September.

The UK has nothing in its macroeconomic calendar this Monday but will release fresh employment figures on Tuesday and July inflation on Wednesday.

GBP/USD short-term technical outlook

The GBP/USD pair daily chart shows that it broke to the downside after a consolidative phase, signaling higher chances of additional slides ahead. In the daily chart, technical indicators keep heading south despite being in oversold territory, while the pair is developing far below its moving averages, maintaining the risk skewed to the downside. In the 4 hours chart, the pair took a dive after repeatedly failing to overcome its 20 SMA, which now gains downward traction at around 1.2130, well below the larger ones. Technical indicators in this last time-frame offer sharp bearish slopes, with the RSI currently at 27. The decline could gain additional momentum on a break below 1.2020 while an upward corrective movement would likely meet sellers at around the mentioned 1.2130 level.

Support levels: 1.2020 1.1980 1.1930

Resistance levels: 1.2055 1.2090 1.2130

View Live Chart for the GBP/USD

Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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