Tesco Share Price: Beware of FX Risks as Sterling Crashes

Summary:
• Tesco share price has been under intense pressure in the past few days as concerns about the UK economy remains.

Tesco share price has been under intense pressure in the past few days as concerns about the UK economy remain. The stock crashed to a low of 215.2p on Monday, which was the lowest level since March 2021. It has fallen by almost 30% from the highest point this year. Other retail stocks like Marks and Spencer and Ocado have all retreated.

Weak sterling is a major issue

Tesco is the biggest retailer in the UK with thousands of stores in the country. Therefore, like Lloyds Bank, Tesco is often seen as a barometer for the UK economy because of the number of lives it touches on a daily basis.

This explains why Tesco shares have been in a strong bearish trend in the past few months since the country’s economy has deteriorated substantially. The situation worsened this week as the British pound crashed to a record low. It has crashed by more than 20% this year alone.

Therefore, analysts believe that Tesco will be hit hard since it depends mostly on foreign imports. Most of the products in its stores are from countries like China and those in the European Union. As such, the company will need to spend more pounds buying products from these countries. At the same time, soaring inflation will likely reduce retail spending. In fact, the most recent data shows that retail spending has dropped.

Tesco share price forecast

The four-hour chart shows that Tesco shares have been in a strong bearish trend in the past few years. It has managed to drop below the important support level at 237.2p, which was the lowest level on September 8. The stock also moved below all moving averages while the MACD has moved below the neutral level.

Therefore, there is a likelihood that the stock will continue falling as sellers target the next key support level at 200p. The stop-loss for this trade is at 230p.