Recession Risks Mount For The U.S. Economy
2022.06.21 10:50
The only United States will open today after the federal holiday celebration. Meanwhile, the macroeconomic calendar will still be empty. However, it doesn’t mean that the market will stay flat.
Persistent inflation is turning into a more acute problem, and recession risks in the United States are mounting. In this light, President Biden has made a daunting statement, saying that to tame inflation and avoid a recession, the unemployment rate should soar to 5.0% and stay firm at this level for five years.
Unemployment in the country is currently at 3.6%. To stabilize prices, millions of Americans would have to lose their jobs as this is the only way to reduce aggregate consumer demand and lower prices, according to the law of supply and demand. What sound even more alarming is that the labor market should stay this way for five years.
Does this mean it could take five years to bring inflation under control? Anyway, the possibility of an increase in the unemployment rate bodes no good. Indeed, when such statements are made by the president, all the effort will likely be concentrated on that. In such a case, investors would lose interest in the American economy and the greenback. Therefore, the US dollar is highly likely to incur losses today.
Technical Outlook
GBP/USD has encountered support around 1.2155/1.2180, which led to a decrease in the volume of short positions. The Relative Strength Index hovers around 50 on the 4-hour chart, indicating a flat market. On the daily chart, the RSI is moving between 30 and 50, signaling a downtrend.
The crossover of the Alligator’s MAs on the 4-hour chart confirms the flat market. The indicator’s MAs are moving down on the daily chart, signaling a downtrend cycle. Quotes are hovering around 1.2225/1.2280, activity is low, and the market seems to be flat.
Eventually, it may trigger an accumulation process, and speculators may push the price higher. Long positions with further upside potential could be considered after consolidation above 1.2290. Short positions could be opened should the pair settle below 1.2220, with targets around 1.2155/1.2180.
In terms of complex indicator analysis, there are mixed short-term and intraday signals. In the medium term, indicators are signaling the downtrend.
GBP/USD hourly price chart.
