GBP/USD Slips to $1.1480 – What Could Drive an Uptrend?

Posted Wednesday, September 7, 2022 by
Skerdian Meta • 2 min read
GBP/USD remains near the two-year low as investors flirt with 1.1450 while posting the largest daily loss in a week. With this, the GBP/USD pair is approaching the most recent low near 1.1443 ahead of Wednesday’s London open.

The pound has dropped to its lowest level against the US dollar since 1985, reflecting the country’s terrible economic state. Investors are bracing for sterling to fall even deeper, to a low not seen in more than two centuries of transatlantic trade.

According to FactSet, the pound plummeted as low as $1.1443, its lowest level since 1985, before recovering to trade up 0.1% at midday London time Monday. Sterling’s decline is a result of the continuous US dollar advance, which has recently pushed the euro and Japanese yen to multidecade lows. However, the issues are also indigenous.

The United Kingdom is facing an energy crisis that might leave many homes unable to pay their bills this winter. The pound’s weakness is exacerbated by uncertainty about the economic policies that the United Kingdom’s next prime minister will implement and the Bank of England’s ability to handle sky-high inflation.

“The economic issues confronting the UK economy are arguably unprecedented in living memory,” said Mark Dowding, a chief investment officer of BlueBay Asset Management.
GBP/USD Technical Outlook

Technically, the March 2020 bottom near 1.1410 and the support line of a one-month-old falling channel near 1.1380 will be in focus; if the GBP/USD price falls below 1.1380, the odds of a plunge towards the early 1985 levels around 1.1000 increase.

Alternatively, recovery moves remain elusive until the 10-DMA resistance near 1.1610 is breached. The indicated channel’s top, which was at 1.1640 at the time of publication, also acts as an upside barrier. Even if the GBP/USD bulls break beyond the 1.1640 barriers, the July low of 1.1760 may challenge the upward trend.

To summarize, the GBP/USD is likely to remain on the bear’s radar, but downside potential is limited. Good luck!

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