February 28, 2022 13:44:40
GBP had held up quite well in the current risk-off environment. But Thursday’s events saw a sharp downturn enhancing its status as a more-risk sensitive currency. Surging gas and energy prices will no doubt push the Bank of England towards a more hawkish bias unless the shock hits growth more than currently expected. Huge uncertainty abounds which only underpins support for havens like JPY.
We wrote a few weeks ago about how this pair was approaching long-term resistance around 158 once again. The long-term uptrend went back to March 2020 and the onset of the pandemic. But we had seen more two-way price action over the last nine months, trading broadly between 150 and 158.
The pair had dropped below 150 in December and at the start of the year, but bulls bid the pair up to 157.76. Risk off sentiment and the equity market selloff then pushed prices back to the long-term SMAs (50, 100 and 200-day) above 153.
Prices then bounced strongly and challenged the October highs above 158. However, the failure again in this resistance zone warned of a steeper pullback and the pair has sold off after trying to consolidate above 156.
Risk-off sentiment has seen prices plunge to the 200-day SMA at 153.38 twice in the past three trading sessions. But the recovery means this level now represents strong support, along with the year-to-date low at 152.90. Today’s retest and bounce has pushed above the 100-day SMA at 154.39. This level now becomes initial support. Bulls will need to get above 156 to slow the bearish momentum.
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