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Is the collapse of the pound bulls' defense just the beginning?
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Hello everyone, today XM Forex will bring you "[XM Forex Market Analysis]: The collapse of the long defense line of the British pound is just the beginning?". Hope it will be helpful to you! The original content is as follows:
On Monday (June 23), the pound fell sharply against the US dollar (GBP/USD), and the European trading period reached a low of 1.3369, approaching the lower track of the Bollinger Band. The fuse of the downward trend xmmarkets.cnes from the escalation of the geopolitical situation: the United States launched a crackdown on three nuclear facilities in Iran, triggering a xmmarkets.cnprehensive increase in tensions in the Middle East. Risk aversion sentiment dominated the market, pushing the US dollar index (DXY) to a three-week high above 99.40, while the pound showed weakness in the risk aversion wave and continued to be under pressure.
Fundamentals
Return to safe-haven funds in the US dollar led this round of exchange rate decline. According to Reuters, Iranian military spokesman Zolfaqari warned that U.S. military operations have expanded Iran's legal strike scope, predicting "serious consequences." The Iranian parliament also submitted the proposal to "block down the Strait of Hormuz" to the National Security Council. Once it xmmarkets.cnes true, it will directly impact global crude oil transportation routes, further aggravating market concerns about xmmarkets.cnmodity inflation.
Although the UK's S&P Global xmmarkets.cnprehensive Purchasing Managers Index (PMI) initial value was 50.7, better than the previous value of 50.3 and expected 50.5, and both services and manufacturing industries showed signs of stabilization, it failed to effectively boost the exchange rate trend. The market is more inclined to embrace the US dollar as a "hazard-haven anchor". In addition, the Bank of England (BoE) kept interest rates unchanged at 4.25% in last week's interest rate resolution, with Governor Bailey stressing a "gradual and cautious" monetary easing strategy and suggesting that weakening labor markets and rising energy prices will be key risks to the economy in the future.
In contrast, the Fed, although Waller suggests that interest rates may be cut in July and downplays the long-term impact of tariffs on inflation, the market impact of escalating geopolitical risks is suppressing the broader marketLoose expectations. In the short term, the market will pay more attention to risk aversion behavior rather than policy forwarding.
Technical:
The daily chart of GBP/USD shows that the trend reversal signal begins to appear. The exchange rate retreated from the high point of 1.3631 to 1.3369. The Bollinger Band channel opened downward space, and the lower rail support was at 1.3355. If it fell below the subsequent decline, it may trigger an accelerated downward trend. The Bollinger band is in a downward opening pattern as a whole, and the Bollinger middle rail is located at 1.3492, which forms a short-term pressure band above.
Looking at the MACD indicator, the fast line (DIFF) and the slow line (DEA) have once again crossed downward, and the bar chart turns green and continues to expand, indicating that the bear momentum is enhanced. The RSI indicator is down around 45, far from entering the oversold zone, leaving room for further decline, and the rebound momentum is limited. Overall, the analysis believes that the trend of weakening technology is clear.
Prevention of market sentiment:
The current market has entered a typical "panic-avoidance" state, the US dollar has benefited as a traditional safe-haven asset, while the pound has received indirect pressure due to the lack of clear catalysis and geopolitical influence. Although the UK's macro data is marginally improving, under the impact of emergencies, the market has not turned to fundamental logic in the short term.
It is worth noting that the Fed's dovish remarks did not immediately boost risky assets, reflecting that the market is prioritizing geopolitical uncertainty over policy easing.
On the other hand, analysts believe that the market is highly sensitive to changes in the situation in the Strait of Hormuz. If Iran takes further substantial measures, it may trigger a surge in crude oil prices, which will in turn push up global inflation expectations and affect the easing path of central banks in major economies. This will form a catalyst for a new round of fluctuations in the foreign exchange market.
Future Outlook:
In the short term, analysis believes that the exchange rate is still under pressure and downward, which tests whether the lower support of the Bollinger Band can stop the decline. If 1.3355 falls, it may trigger further technical sell-offs, and the next target may point to the range of 1.3230–1.3250. If the rebound is to recover the 1.35 line of resistance first to alleviate the bear pressure.
From a medium-term perspective, the market focus is still focused on the differentiation of policy paths between the Federal Reserve and the Bank of England. Analysts believe that if the Federal Reserve cuts interest rates in July and the UK is sluggish due to inflation and energy risks, the exchange rate is expected to move out of a stabilization and recovery pattern in the medium term. However, if geopolitical conflicts continue to escalate, the safe-haven dollar will remain strong, and the pound may continue to decline, and even retest the level below 1.3230.
The above content is all about "[XM Forex Market Analysis]: The collapse of the long defense line of the British pound is just the beginning?" It was carefully xmmarkets.cnpiled and edited by the editor of XM Forex. I hope it will be helpful to your trading! Thanks for the support!
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