GBPUSD Tests 1.20 Threshold
01 July 2022
The British Pound dropped another 1.5% on Friday, falling to the psychological level of 1.20 as traders rushed into the USD amid global recession fears.
UK economy is already in a recession
Since the beginning of the epidemic, British business executives have never been more pessimistic about the state of the economy. A study of more than 400 CEOs by the Institute of Directors revealed that a gauge of economic confidence dropped to minus 60 in June, down from minus 45 in April, and the lowest level since the coronavirus first affected the UK in early 2020.
Maroš Šefčovič, vice president of the European Commission, stated that the UK economy's adverse effects of Brexit were "beginning to manifest more clearly." Šefčovič said that compared to 2019 levels, UK imports of goods and services into the EU were much lower.
The US ISM Manufacturing PMI index will be scrutinized for new inspiration in the second half of the day. The headline PMI is predicted to drop from 56.1 in May to 55 in June. It is also anticipated that the Prices Paid component would decrease to 80.5 from 82.2.
Breakdown below 1.20 seems imminent
If the GBP drops below 1.20, the next target will be at the current cycle lows at 1.1950. However, the decline might not stop there, judging from the bearish momentum. So the next target could be at 1.18.
The MACD indicator is about to send a bearish signal again and is far from oversold conditions, implying a space for further weakness in price.
On the upside, the price must climb above the short-term downtrend line, currently near 1.22, to see some stabilization.