Market Analytics and Considerations
Key Notes
- Housing prices across the UK shocked to the upward, but the general picture is still gloomy.
- Next week will center on US statistics.
- Probable breakouts of a rectangle.
Fundamental Backdrop in GBP
The British pound originally responded positively to stronger home prices than anticipated (see economic schedule below), but markets rapidly dropped sharply as it became apparent that the UK property sector was decelerating both YoY and MoM.
Due to reduced demand from the UK public, higher interest rates have unavoidably been pulling down property prices. Fears of a UK recession will probably prevent the sterling from rising much in Q1 2023, particularly if the property market keeps on getting bad. Reduced home demand could lead to considerable in weaker inflation and a more subdued Bank of England, which would have a negative influence on the pound (BoE). In the occurrence of a recession, the USD will use its status as a place of refuge to entice customers away from the UK economy, leaving pound susceptible to further decline.
The price movement on the 4-hour GBP/USD indicator remains within the evolving rectangle pattern that is positioned between the psychological 1.2000 and 1.2100 levels. Although there hasn’t been much conviction away from the 200-day SMA , the beginning of 2023 has some high-impact U.S. statistics, including that of the ISM PMI, FOMC comments, and Non-Farm Payrolls (NFP), which might function as the stimulus to breach out of the consolidation formation that is now in place.
53% of retail traders presently have long bets on the GBP/USD exchange rate. Though, we take the opposite position to the common opinion, but recent changes in long and short positions have led us to adopt an upward tilt for the near term.
Major resistance levels:
1.2154
1.2100
200-day SMA
Major support levels:
1.2000
1.1900
