The Bank of England is in a difficult situation in which it is necessary to approach the process of tightening monetary policy in such a way as not to harm economic growth and economic recovery after severe lockdowns due to the coronavirus.
There are two other factors that cause concern. The first of them is the ever-reminding exit of the UK from the European Union. The lack of progress in negotiations between the EU and the UK could force the British government to apply the so-called Article 16.
The second negative factor for the British economy and the pound is the ongoing military conflict in Ukraine. Economists believe that the growth rate of British GDP may be seriously reduced in the near future because of this.
Our main scenario still assumes a decline in GBP/USD. The first signal for the resumption of short positions may be a breakdown of the short-term support level of 1.3220 and the support level of 1.3210 (Fibonacci level of 23.6% correction to the decline of the GBP/USD pair in the wave that began in July 2014 near the level of 1.7200), and the confirming one is a breakdown of an important level support 1.3170. The immediate downside target is 1.2865, through which the lower borders of the descending channels pass on the daily and weekly charts.
In an alternative scenario, GBP/USD will resume growth after the breakdown of the resistance level of 1.3297, and the breakdown of the key resistance level of 1.3510 may again return the GBP/USD to the bull market zone.
Support levels: 1.3220, 1.3210, 1.3170, 1.3000, 1.2950, 1.2865, 1.2685, 1.2400, 1.2250, 1.2085, 1.2000
Resistance levels: 1.3297, 1.3340, 1.3390, 1.3510, 1.3580, 1.3640, 1.3700, 1.3745, 1.3832, 1.3900, 1.3970, 1.4000
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