Is there an end to the well the GBP is falling into?
Skerdian Meta • 2 min read
The US producer inflation (PPI) and the retail sales last Friday cast a shadow on the US economic recovery. There have been signs of weakness but these signs have diminished in the Q2 (second quarter). Last Friday´s numbers though stank. Although these economic data reports are very volatile and one single month´s report is not to be taken at face value, the USD suffered nonetheless.
It declined about 100 pip in all major forex pairs, but slowly crawled back and ended the day unchanged or with minimal losses, apart from the JPY and GBP. I didn´t expect the Buck to lose 100 pips on the knee jerk reaction, but the forex market doesn´t care about our feelings. It´s a tough beast, isn´t it?
As I said above, most major currencies ended up the day unchanged or a little higher against the USD, but the GBP. It closed the day about 60 pips below the opening level and right now it is about 70 pips above the 1.28 support level which held the epic fall after the Brexit vote. In these sort of situations 70 pips look like just a handful of pips away. The 0.9% contraction of the UK construction sector on Friday might have had an impact as well.
1.28 here we come
Today has been one-way traffic all along, so 1.28 feels very vulnerable. No one knows the bottom of this well If this support level goes. In my opinion, it will definitely be broken at some point, but the question is when. Are the forex traders going to give the GBP the final blow during the US session today; will thin liquidity be the poisonous ingredient in this toxic buffet the GBP is having or will this support level be declared dead tomorrow in the London session?
You can check your forex analytic skills by taking your pick when the big bang is going to take place. Hint – The consumer inflation (CPI) numbers are due tomorrow.