The GBP/USD currency pair reverses its earlier course after hitting a weekly high of 1.2507 and drops towards the 1.2400 figure. This came in the midst of a risk-off impulse that triggered flows towards safe-haven assets.
Therefore, the US Dollar (USD) remains in the driver’s seat, although US Treasury bond yields are collapsing. The GBP/USD is trading at 1.2401, down 0.67%.
The pair extended its losses due to risk aversion, even though US Treasury bond yields are plunging. Conversely, the greenback is rising 0.48%, as shown by the US Dollar Index at 101.815.
Across the pond, the UK agenda revealed the CBI Industrial Trend Order, which stood at -20, neither improving nor worsening, though flashed that the economy is stagnating. Meanwhile, the Bank of England (BoE) Governor Ben Broadbent commented that there’s no evidence that QE sparked the jump in inflation.
Of late, the BoE Chief Economist Huw Pill commented that British people need to accept that they are “poorer.” Pill added that recent events call for higher rates and foresees UK’s inflation would dip to 2% in two years.
Technical Analysis
From a technical perspective, the GBP/USD appears to have formed a head-and-shoulders chart pattern that could drive prices to test the confluence of the 100 and 200-day EMAs at around 1.2170.
But firstly, the GBP/USD must break below the head-and-shoulders neckline at approximately 1.2360/70, so it could confirm its validity.
If that scenario plays out, the GBP/USD next support would be the 50-day EMA at 1.2289 and then the 1.2200 figure. Conversely, if GBP/USD stays above 1.2400, it could pave the way for a bullish continuation towards 1.2500.
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