The strength of the US dollar, supported by the expectations of raising US interest rates throughout 2022, and the classic political collapse of the Boris Johnson government was a strong motivation for the bears to push the price of the GBP/USD pair to collapse towards the 1.1875 level. This is the lowest support level for the currency pair since the markets collapsed at the height of the Corona epidemic in March 2020. Boris Johnson’s resignation as British Prime Minister contributed to a cautious recovery of the pound sterling against the dollar towards the level of 1.2056 before closing trading around the level of 1.2016. Overall, according to experts, the UK market’s indifference to the overthrow of Prime Minister Boris Johnson may change quickly.

Johnson’s ouster has increased the odds of an early general election, according to market analysts at NatWest Markets and Citigroup Inc. and Mizuho International Plc. It opens the door to a spending spree to lure voters before they head to the polls, followed by the prospect of the opposition Labor Party coming to power and paying more cash.

It will affect everything from Bank of England policy and taxes to sterling, bonds and stock markets – and will also see past risks resurface like another Scottish independence vote and the reopening of BREXIT negotiations. Although there are still a lot of terms and conditions, the election is already permeating the minds of investors.

For their part, said NatWest analysts including Imogen Bachra: “The probability of the election itself will be unequivocally negative for the currency with the escalation of broader political risks.” Acting “strongly” in the second half of 2023 and higher long-term bond yields.

And after three turbulent years in office, Johnson’s reign appears to have come to a chaotic end after the mass resignation of members of his cabinet last week. His Conservative Party is urgently making plans for an accelerated contest to choose his successor this summer. The next election won’t be until January 2025 at the latest, and Johnson’s successor will not be obligated to return to the polls before then. However, they may be tempted to take advantage of any political honeymoon in the early months of their term in hopes of retaining another five years of power and general legitimacy. This prospect has already led the NatWest team to change the Bank of England’s forecast, anticipating faster rate increases and a slower bond sale program due to the prospect of increased government spending. They revised the 10-year Treasury yield target by the end of the year to 2.25%.

Overall the picture for sterling, which is already down about 11% this year, is more complex. While easing government fiscal constraints or lowering taxes could give the British economy a boost, it could also drive up inflation and put public finances under pressure. The new leadership will introduce other changes to market sensitive policy as well.

And for the UK stock market, domestic-focused companies are likely to get a boost if a new leader raises question marks over a planned increase in corporate tax next year. The British benchmark FTSE 250 is down 20% in 2022. Severe interest rate increases in the Bank of England and the British pound could have a negative impact on the FTSE 100, where about 75% of corporate sales take place overseas. Higher borrowing costs would also hurt consumers, and thus retail stocks such as Next Plc and Marks & Spencer Group Plc.

While a rate hike would widen profit margins for lenders such as Lloyds Banking Group Plc and NatWest, British bank stocks may remain under pressure as the country faces a recession. Investors in utilities and oil companies such as Centrica Plc and Shell Plc will keep a close eye on pressure to raise taxes on the sector to help with energy bills.

Regarding the broader trade and political risks, some analysts point to the possibility of improving the relationship with the European Union. Johnson has introduced legislation that would give Britain the ability to unilaterally adjust a post-Brexit settlement for Northern Ireland, threatening a trade war with the bloc. On the other hand, a new election could raise the existential risk of Scotland’s secession from the United Kingdom.

GBP/USD Forecast

Despite the recent correction, the GBP/USD price is still in the range of a strong bearish trend, and stability below the psychological support 1.2000 opens the way for the bears to move further down. The most important support levels for the currency pair will be 1.1825 and 1.1700, respectively. The continuation of the British political vacuum and concern about the future of economic stagnation there will negatively affect any gains for the pound against the rest of the other major currencies, and therefore I expect to sell the GBP/USD from every rising level.

On the upside, there will not be an important first break of the current downtrend without the GBP/USD moving towards the resistance level of 1.2390 as seen on the daily chart below.

Today’s USD/TRY Signal

Risk 0.50%.

None of the buy or sell transactions of yesterday were activated

Best entry points buy

• Entering a long position with a pending order from 14.62 مستويات levels
• Set a stop-loss point to close the lowest support level 14.46.
• Move the stop loss to the entry area and continue to profit as the price moves by 50 pips.
• Close half of the contracts with a profit equal to 75 pips and leave the rest of the contracts until the strong resistance levels at 14.85.

Best selling entry points

• Entering a short position with a pending order from 14.85 levels
• The best points for setting the stop loss are closing the highest levels of 14.98.
• Move the stop loss to the entry area and continue to profit as the price moves by 50 pips.
• Close half of the contracts with a profit equal to 75 pips and leave the rest of the contracts until the support levels 14.40

The lira recorded some gains, although it continued to trade within a limited range. Investors are looking forward to the upcoming visit of Turkish President Recep Tayyip Erdogan to the Kingdom of Saudi Arabia today, Thursday. It is expected that the visit will be the beginning of ending the political competition between the two regional powers. Turkey seeks to benefit from direct investments in the Gulf, which is what happened after the UAE supported the Turkish economy through direct investment agreements that exceeded ten billion dollars. It is noteworthy that the Turkish economy, which suffers from large rates of inflation, which contributed to pressure on the value of the Turkish currency, which has lost about half of its value since the end of last year. It is expected that the lira will continue to decline, especially with the dollar’s rise globally, amid the Fed’s insistence on raising the interest rate consecutively, starting from the expected meeting during the next month and successive meetings until the end of the year.

On the technical front, the Turkish lira stabilized, declining against the dollar, as it moved slightly during today’s trading. The lira is trading from the demand areas shown on the chart. At the same time, the pair is based on the ascending trend line shown on the chart. With continued trading within a limited trading range. The pair is trading above the resistance line at 14.76 on the 240-minute time frame, shown on the chart. The pair is trading the highest support levels that are concentrated at 14.76 and 14.60 levels, respectively. On the other hand, the lira is trading below the resistance levels at 14.85 and 14.89, respectively. The pair also rose around the moving averages 50, 100 and 200, respectively, on the four-hour time frame as well as on the 60-minute time frame. Please adhere to the numbers in the recommendation with the need to maintain capital management.

We expect the lira to fluctuate within the current range without major changes.

Today’s recommendation on the lira against the dollar

Risk 0.50%.

Yesterday’s purchase order was activated, and the deal is still in circulation

Best buy entry points

• Entering a long position with a pending order from 14.50 levelsSet a stop loss point to close the lowest support levels 14.36.
• Move the stop loss to the entry area and continue to profit as the price moves by 50 pips.
• Close half of the contracts with a profit equal to 75 pips and leave the rest of the contracts until the strong resistance levels at 14.85.

Best selling entry points

• Entering a short position with a pending order from 14.86 levels
• The best points for setting the stop loss are closing the highest levels of 14.98.
• Move the stop loss to the entry area and continue to profit as the price moves by 50 pips.
• Close half of the contracts with a profit equal to 75 pips and leave the rest of the contracts until the support levels 14.40

The Turkish lira rose slightly during trading yesterday, Tuesday, despite US data that showed a rise in inflation, which was supposed to cast a shadow on the dollar. The dollar was expected to rise in light of expectations of tightening US monetary policy to control inflation expectations. However, the high inflation figure, which came less than expected, contributed to the decline of the dollar and thus the rise of emerging market currencies. Meanwhile, local reports reviewed the rise in inflation in Turkey to its highest level in twenty years, figures attributed by the Turkish President to the rise in global energy prices due to the war in Ukraine, but he did not mention the interest rate cut in Turkey, as well as the falling lira. Unofficial forecasts indicate that the Turkish lira will continue to decline until the end of this year. This is in contrast to official statements by the Turkish Finance Minister, who promised to reduce inflation and increase the price of the lira at the same time.

On the technical front, the Turkish lira increased against the dollar during yesterday’s trading, as the pair reached the bottom recorded at the end of last month. In general, the US dollar against the dollar continued to trade within a narrow trading range. The pair is currently trading below the descending trend line on the 240-minute time frame, shown on the chart. The pair also varied around the 50, 100 and 200 moving averages, respectively, on the four-hour time frame, while the pair fell above those averages on the 60-minute time frame. The pair is trading the highest support levels that are concentrated at 14.50 and 14.25 levels, respectively. On the other hand, the lira is trading below the resistance levels at 14.76 and 14.85, respectively. We expect the lira to fluctuate within the current range without major changes. Please adhere to the numbers in the recommendation with the need to maintain capital management.

Today’s recommendation on the lira against the dollar

Risk 0.50%.

Yesterday’s purchase order was activated, and the deal is still in circulation

Best buy entry points

• Entering a long position with a pending order from 14.55 levels
• Set a stop loss point to close the lowest support levels 14.36.
• Move the stop loss to the entry area and continue to profit as the price moves by 50 pips.
• Close half of the contracts with a profit equal to 75 pips and leave the rest of the contracts until the strong resistance levels at 14.85.

Best selling entry points

• Entering a short position with a pending order from 14.86 . levels
• The best points for setting the stop loss are closing the highest levels of 14.98.
• Move the stop loss to the entry area and continue to profit as the price moves by 50 pips.
• Close half of the contracts with a profit equal to 75 pips and leave the rest of the contracts until the support levels 14.40

The rising cost of energy imports widened the scope of the deficit. However, the statements of the Turkish Finance Minister, Nureddin Nabati, said that his country does not live in isolation from the world, and that inflation is high around the world. He also added that inflation expectations in the country are expected to decline by the end of this year.

These statements contradict the results of a survey issued by the Turkish Central Bank at the end of last week, which showed expectations of rising inflation and a decline in the exchange rate of the lira.

On the technical front, the Turkish lira increased against the dollar during yesterday’s trading, as the pair broke the narrow trading range within the bullish price channel on the 240-minute time frame. In general, the US dollar against the dollar continued to trade within a narrow trading range. The pair is currently trading above the bullish trend line on the 60-minute time frame, as the pair varied around the 50, 100, and 200 moving averages, respectively, on the four-hour time frame, while the pair declined above those averages on the 60-minute time frame. The pair is also trading the highest support levels, which are concentrated at 14.60 and 14.55 levels, respectively. On the other hand, the lira is trading below the resistance levels at 14.76 and 14.85, respectively. Please adhere to the numbers in the recommendation with the need to maintain capital management.