After making a short pause in the middle of the week, the British pound is back to falling. Investors are quite calm in estimating the statistics, but become rather nervous when it comes to the Brexit issue again.
The statistics published on Wednesday afternoon showed that the Inflation Rate in the United Kingdom remained unchanged in May at 2.4% y/y. In case of the Core Inflation Rate, the situation is similar – 2.1% y/y, the same as in the previous month. The HPI decreased from 4.2% y/y to 3.9% y/y. The PPI Input added 2.8% m/m, while the PPI Output expanded by 0.4% m/m, the same as the month before.
Prices are more or less stable in the United Kingdom and that’s good for the pound. However, the Brexit issue is reviving once again and that’s not good at all.
Yesterday, the British Prime Minister Theresa May stole the limelight again when she was speaking about amendments to the Brexit bill. As a result, she managed to carry her point and the Pound moved upwards a little bit, but then fell again. Changes in the British government don’t make investors happy as well: earlier, the British Minister of Justice Phillip Lee resigned from his position due to his disagreement with the British Government on the Brexit issue.
This week, the pound will depend on the USD behavior a lot. The USD, in its turn, is going to respond to the results of the US Federal Reserve and the European Central Bank meetings. On Thursday, investors should pay attention to the May report on the Retail Sales in the UK.
After falling for a long time, GBP/USD has broken the resistance line and formed the correctional uptrend channel. The short-term technical picture shows that the price broke the support line of the rising channel and started another downtrend, which may become a new mid-term impulse inside the long-term downtrend. The local downsides target is at 1.3290. After breaking it, the pair may continue falling to break the low at 1.3204. However, one shouldn’t exclude a possibility that the correction may yet continue. If the instrument breaks the resistance line at 1.3400, it may form a new ascending impulse to reach the next resistance level at 1.3498.
Author: Dmitriy Gurkovskiy, Chief Analyst at RoboForex
Disclaimer
Any forecasts contained herein are based on the authors' particular opinion. This analysis may not be treated as trading advice. RoboForex bears no responsibility for trading results based on trading recommendations and reviews contained herein.