GBPUSD hits the lowest monthly level as the correction from June 10 highs continue, amid weak economic data from the UK. Brexit uncertainty and a rising number of new coronavirus infections in the UK also weigh on GBP. Leicester City will be excluded from the re-opening on July 4, with non-essential shops to close from today, amid fresh concerns about a rise in new infections.
PM Boris Johnson will announce later today, a £5bn fast-track infrastructure spending plan, to boost the coronavirus battered economy, with a more detailed ‘new deal’ plan to be published after the summer. I don’t expect the announcement to have any impact on the pair.
The UK Gross Domestic Product (GDP) came in at -2.2%, below the forecasts of -2% in the first quarter. The yearly GDP reading came down to -1.7% below the expectations of -1.6%. The balance of payments deficit grew to 21.1 billion pounds in the 1Q, above the forecast of 15.4 billion pounds.
GBPUSD is 0.30% lower at 1.2263, making fresh monthly lows. The pair’s correction accelerated after it breached below the 100-day moving average, and the 50-day moving average as it continues lower for the fifth consecutive trading session. Now the technical picture on the daily chart is clearly bearish, and lower levels might be on the cards. Only a return above the 50-day SMA might cancel the negative bias.
On the downside, initial support stands at 1.2259 the intraday low. In case of a break below the 1.2259 support level, the GBPUSD could retreat towards 1.2203 the low from May 27. If GBPUSD continues lower, the next support zone would be met at 1.2164 the low from May 25 trading session.
On the flip side, first resistance for the GBPUSD pair stands at 1.2317 the daily high. The next hurdle for GBPUSD would be met at 1.2410 the 50-day moving average. A successful break above 1.2410 is likely to open the way for a move higher to the next resistance at 1.2471 the 100-day moving average.