The UK’s fuel crisis has exacerbated GBP’s decline, breaching briefly a 1.3514-1.3482 support to register a recent 1.3412 low. A bearish triangle is possibly in play, which could lead the cable to test the 1.3163/58 support zone, Benjamin Wong, Strategist at DBS Bank, reports.
Snuffed out by a fuel crisis
“The two prior resistances turn support pods at 1.3514 and 1.3482 have been tested with the recent low posted at 1.3412, as a hint of weakness. This should keep the near-term bearish triangle as a viable theme to trade, as long as GBP does not sustain gains over the 100-week moving average at 1.3866 and major resistance at 1.3914.”
“The triangle can eye a probe towards the 38.2% Fibonacci retracement of the 1.1412-1.4248 range grip (at 1.3158), which covers the covid flash lows and its highest recovery point. In the same price zone, we have in sight strong support offered by the 200-week moving average of 1.3163.”
“The UK’s fuel supply chain woes are unlikely to fade away too quickly. This dilutes the scope for GBP gaining from a potential policy tightening, given that it eats into the UK’s growth potential.”
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