Ahead of the release of a batch of important and influential British and US economic data, the GBP/USD exchange rate deepened in a downtrend for nearly a year. It may attempt a corrective recovery this week if global markets welcome the easing of restrictions related to the Corona virus in Shanghai. The sterling dollar pair is stable around the 1.2365 level at the time of writing the analysis, after three trading sessions during which it tried to recover from the last collapse towards the 1.2155 support level. The lowest level in two years, with the strong appreciation of the US currency combined with growing investor concerns about the prospects for the global economy, and the Chinese renminbi extending its massive sell-off in April during the sixth week.
This price action helped lift the US dollar index to its highest level since shortly after the turn of the new millennium before the global market tide turned in favor of the pound late in the European session on Friday, in the process of raising the pound to dollar price again above 1.22 before the weekend. Fortunately for the Pound, there may now be room to extend this recovery after authorities in China announced over the weekend that Shanghai would begin a gradual reopening from the country’s most dangerous “lockdown” to date in what is likely to be meaningful to market sentiment.
China’s shutdown of Shanghai in April has been a significant source of market risk aversion for the past six weeks because the city is home to the country’s largest seaport, which is also the world’s most important due to its importance in international supply chains and the manufacture of goods. This was the reason why the reopening could be a headwind for the safe-haven dollar and a tailwind for many other currencies that could mean an extension of the pound-dollar exchange rate rebound on Friday, although sterling could face technical resistance on the charts once again. Others are at 1.25 or higher.
While the pound against the dollar could benefit from a strong start this week, the risk is that Parliamentary testimony on Monday from policy makers at the Bank of England (BoE), or the subsequent flood of economic data including UK employment and inflation figures limiting From wanting sterling later.
According to the technical analysis of the pair: the recent rebound attempts did not amount to reversing the general trend of the GBP/USD currency pair, where the trend is still downward so far, and the resistance levels 1.2850 and 1.3000 are the most important to change the trend to the upside. According to the performance on the daily chart below, the return of the move towards the support level 1.2215 will strengthen expectations that it might be ready to move towards the psychological support 1.2000 at the earliest time.
The sterling will be affected today by the announcement of jobs and wages figures in Britain. The US dollar will be affected by the announcement of US retail sales and industrial production, and then statements by US Central Bank Governor Jerome Powell.
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