Early Friday’s action is consolidating within a narrow range after Thursday’s post-BoE 2.1% fall, but sterling remains biased lower.
Fresh bearish acceleration was sparked by BoE rate hike in line with expectations but darkened outlook, as the central bank expects inflation in the UK to peak above 10% and the economy is likely heading into recession, stressing it must be very careful with further rate hikes.
The results of UK local elections showed that PM Johnson’s Conservative suffered heavy losses, particularly in London that would further hurt the sentiment and send pound lower.
Cable hit new lowest since June 2020 in European session on Friday, in extension of previous day’s drop, which generated bearish signal on close below pivotal Fibo support at 1.2494 (61.8% of 1.1409/1.4249), which is going to be reinforced on likely weekly close below this level.
Thursday’s large bearish candle weighs on near-term action, along with strengthening negative momentum on daily chart that sets scope for push through initial support at 1.2251 (29 Jun 2020 trough) towards key levels at 1.2080/1.2000 (Fibo 76.4% / psychological).
Limited upticks are expected to provide better selling opportunities.
Res: 1.2380; 1.2411; 1.2494; 1.2516
Sup: 1.2275; 1.2251; 1.2164; 1.2080
