16.05.202210:56 Forex Analysis & Reviews: Analysis and forecast for GBP/USD on May 16, 2022

Over the past trading week, from May 9-13, there were no changes in the price dynamics of the GBP/USD currency pair. The pair continued its decline and updated the previous lows. However, something is already beginning to be seen in terms of the likelihood of some course correction. About this in more detail - in the technical part of the review, but for now I will say again about the main factor that provides significant support to the US dollar. Naturally, this is considered to be the aggressive policy of the US Federal Reserve System (FRS), which is based on a cycle of raising the federal funds rate. At this stage of time, this is perhaps the Fed's only weapon to combat high inflation. At the same time, it is characteristic that the Bank of England is concerned about the same problem and has already carried out several increases in the main interest rate, bringing it to 1%. However, the market does not seem to notice this and exposes the British pound to active sales. However, the situation may change somewhat.

Weekly

As already noted at the very beginning of the article, the bears on the British currency continued to implement their scenario. On the decline, the pair reached the level of 1.2154, from which there was a fairly good rebound and the last five-day trading closed at 1.2257. The long lower shadow that formed after unsuccessful attempts to break through the 1.2200-1.2160 price zone may well be a signal for a course correction or a not-so-significant decrease at this week's auction. Although we see many examples when the market breaks and stronger reversal signals that are against the current trend. In this regard, the focus will be on the minimum values of the previous weekly trades. With their census, the pair will continue to decline to 1.2100 and possibly lower. At the moment, the key resistance zone is in the area of 1.2400-1.2410. If the exchange rate returns above the previously broken support level of 1.2410, bullish sentiment will strengthen, and the pound/dollar pair may roll back to the psychological mark of 1.2500. In any case, the closing of weekly trading above 1.2410 may become a kind of turning point. Of course, there is no need to talk about any change in the trend yet, but a deep correction, which the "Briton" likes to perform so much, will become quite real.

Daily

As you can see, last Friday, the GBP/USD pair rolled back to the broken support level of 1.2260 and closed the session on May 13 near this level. I dare to assume that a return above 1.2260 will signal a false breakdown of this mark and will give grounds to count on a deeper corrective pullback, the goals of which are indicated in the description of the weekly chart. We must remember that both the euro and the pound are significantly oversold, which increases the likelihood of a correction scenario. At the same time, the "Briton" suffered in sales more than the single European currency. Although the market does not take into account several increases in the main interest rate by the Bank of England, I do not exclude that investors may remember this. Taking into account the last weekly and daily candles, the probability of a corrective upward movement remains. However, I do not recommend rushing to open purchase deals yet. First, the signals are not so obvious. Second, purchases are against the current trend, which always carries risks of closing on the stop. In tomorrow's article on GBP/USD, we will consider smaller time intervals and try to assess the situation even more accurately.