Chart Of The Day: Pounded GBP/USD Could Regain Poise
2022.04.29 14:41
Following a sharp two-week drop, there are good technical and fundamental reasons why the GBP/USD could at least stage a decent recovery from here, and potentially even bottom out.
For a start, you don’t need any technical indicators to tell you sterling is severely oversold, having fallen in each of the previous 6 sessions. It is very uncommon for a relatively stable currency not to bounce after such an extended decline.
With all due respect, this is not the Turkish lira or some other troubled emerging market currency. Also, the Bank of England is not doing what the Bank of Japan has done, so don’t expect a similar move to the JPY/USD.
Interestingly, the cable has found some support today around the psychologically important 1.25 handle, which happens to mark the 61.8% Fibonacci retracement level against the move up from the March 2020 low.
It is also worth pointing out that the next big figure of 1.20 also happens to be around a Fib level (78.6% retracement), although I am not necessarily expecting the cable to get there—not unless the BoE walks back significantly from recent hawkish rhetoric, or the Fed becomes significantly more hawkish.
GBP/USD Daily
If you like indicators, the Relative Strength Index (RSI) has reached severely “oversold” levels of
