EUR/USD, also known as the best European stocks, continues to demonstrate an uptrend in the H4 timeframe. With quotes above the 200-day Moving Average and the RSI rebounding from the support line, traders anticipate a potential rise above 3/8 (1.0925) and a subsequent push toward the resistance level of 4/8 (1.0986). However, a downward breakout of 2/8 (1.0864) could signal a trend reversal and lead to a decline to the support level of 1/8 (1.0803). Additionally, a breakout of the upper line of the VoltyChannel on the M15 timeframe may provide further support for the upward movement.
GBP/USD: Overbought Territory and Resistance Levels Pose Challenges
In the case of GBP/USD, also known as Great Britain Pound vs US Dollar, the quotes are currently in the overbought area on the H4 timeframe. The RSI is nearing the resistance line, indicating potential downward pressure. Traders expect a downward breakout of 8/8 (1.2695), leading to a drop toward the support level of 7/8 (1.2573). However, if the pair manages to rise above the resistance level of +1/8 (1.2939), it could potentially reach the level of +2/8 (1.2939). On the M15 timeframe, a breakout of the lower border of the VoltyChannel may increase the probability of a further price decline.
The Pound Sterling (GBP) has encountered significant pressure recently as the UK government takes measures to combat persistent inflation. With the aim of taming inflation, the UK government has announced wage cuts in the public sector and urged industry regulators to reduce profit margins. These fiscal tools have contributed to a decline in the Pound’s value, impacting the currency’s outlook. The Bank of England (BoE) has kept doors open for further rate hikes as achieving the target of 2% inflation remains a challenge.
UK Economic Outlook Vulnerable as Inflation Persists
Last week, the UK experienced hotter-than-expected headline inflation and fresh highs in the core Consumer Price Index (CPI), prompting the Bank of England (BoE) to announce a significant rate hike of 50 basis points. Headline inflation remained higher than anticipated, driven by rising prices for recreational cultural goods and services, air travel, and second-hand cars, offsetting declines in energy prices. Despite consistent policy-tightening measures, the core inflation reached fresh highs at 7.1%. While UK Retail Sales outperformed expectations, the economic outlook remains precarious.
The consequences of persistent UK bankrupt stocks have put pressure on the image of the Conservative Party. Finance Minister Jeremy Hunt rolled back promises of tax cuts, citing potential inflationary pressures and the need to support the central bank’s efforts to curb inflation. Furthermore, discussions with industry regulators about businesses refraining from raising profit margins, known as reflation, have added to the challenges faced by the Conservative Party.
Market Volatility and Risk-Aversion Theme
Amidst lofty equity valuations and the approaching quarterly result season, a risk-aversion theme is prevailing in global markets. This sentiment is reflected in the Pound Sterling’s struggles, as well as the rebound of the best European stocks after a corrective move. Analysts anticipate an interest rate hike by the Federal Reserve (Fed) in July, contributing to the market volatility.
Technical analysis suggests that the Pound Sterling faces barriers around the 1.2740 resistance level. While finding support near the round-level support of 1.2700, the GBP/USD pair may encounter challenges as the US Dollar Index recovers. Traders will closely monitor the Cable’s ability to maintain support or break above the resistance, with a potential return of bullish momentum if it climbs above 1.2800.
