July 22, 2022 13:17:21

The British Pound recovered from the session’s lows but the upside remained capped.  The latest mixed economic data weighed on the currency. However, a correction in the US dollar kept the downside limited.

The S&P Global PMI released today showed UK’s manufacturing sector grew at 52.2 against the market expectation of 52 but below June’s 52.8. The PMI declined for the first time in the last two-year. The data reflected subdued client confidence and weaker demand conditions.

In addition to that, UK Retail sales declined 0.1% in June M-o-M basis, following an upwardly revised 0.8% fall in May and below the market expectations of a 0.3% drop.            

The cable responded to the figures by performing higher against the Euro and recovered some losses against the greenback.

However, soon the gains evaporated and the pound continues to trade lower as the economic data failed to encourage investors. Further, investors are gearing up for an even more aggressive rate hike from the Bank of England (BoE) to tackle the highest inflation rate in four decades.

BOE governor Andrew Bailey prepared for a 50bps hike in August, which would be the largest in 27 years.

The US dollar index (DXY) consolidates below $107, recouping some losses from earlier this week.

As of press time, GBP/USD reads at 1.1957, down 0.31% for the day.

GBP/USD extends losses toward 1.1950

On the 4-hour chart, the descending trend line from the highs of 1.2318 acts as a strong upside hurdle for the bulls. However, the price breached the trend line on July 18 with strong buying momentum.

After the breakout, the asset faces rejection near 1.2055 as it formed a strong resistance zone. The price took support near the 50-day EMA at 1.1957.

The MACD gives a bearish crossover and moves toward the midline. A break below the central line would intensify the selling toward the 1.1890 level. On the other hand, an acceptance above the 1.2000 mark would invalidate the bearish argument.