It is a quiet day for the GBP/USD. From the economic calendar, there are no UK economic indicators for the markets to consider. The lack of stats will leave UK politics and monetary policy in the spotlight.
This week’s stats have painted a gloomy picture of the UK economy. UK Prime Minister Sunak will need to convince the markets that there is a way forward to tackle the economic doom and gloom without austerity measures.
No Bank of England Monetary Policy Committee members are on the calendar to deliver speeches today, leaving the markets to monitor media chatter.
GBP/USD Price Action
At the time of writing, the Pound was up 0.42% to $1.15150. A mixed start to the day saw the GBP/USD fall to an early low of $1.14302 before rising to a high of $1.15150.
The Pound needs to avoid the $1.1412 pivot to target the First Major Resistance Level (R1) at $1.1554. Expectations of a Fed pivot and a pickup in risk appetite would support a breakout from the Tuesday high of $1.15150.
In the case of an extended rally, the GBP/USD would likely test the Second Major Resistance Level (R2) at $1.1641. The Third Major Resistance Level (R3) sits at $1.1871. However, Rishi Sunak’s policies will become the focal point, with any hints of austerity measures likely to limit the upside.
A fall through the pivot would bring the First Major Support Level (S1) at $1.1324 into play. However, barring a risk-off fueled sell-off, the Pound would likely avoid sub-$1.12 and the Second Major Support Level (S2) at $1.1182.
The Third Major Support Level (S3) sits at $1.0952.
Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The GBP/USD sits above the 200-day EMA, currently at $1.13131.
The 50-day EMA closed in on the 200-day EMA, with the 100-day EMA narrowing to the 200-day EMA, delivering bullish signals.
A GBP/USD hold above the 200-day EMA ($1.13131) would support a breakout from R1 ($1.1554) to bring R2 ($1.1641) into view. However, a fall through S1 ($1.1324) would bring the EMAs into play and signal a reversal of Tuesday’s gains.
The US Session
It is a relatively quiet day ahead on the US economic calendar, with trade data and US housing sector numbers in focus. Following market sensitivity to house price data on Tuesday, expect more of the same today. Mortgage Bankers Association weekly mortgage reports will also draw interest as mortgage applications wane.
However, no FOMC members will speak to guide the markets following today’s stats. The FOMC blackout period started on Saturday and will extend until November 3.
Going into the Wednesday session, the FedWatch Tool had the probability of November and December rate hikes at 95.1% and 47.9%, respectively. One week ago, the likelihood of a 75-basis point hike in December stood at 77.0%.
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