Fundamental Overview
The USD performance this week has been negative despite the decreasing December rate cut odds. We’ve seen also other markets behaving in a strange way, so it’s hard to pinpoint what is really driving the markets at the moment.
The focus now is of course on the Fed and the US data ahead of the December FOMC meeting. The market pricing is now showing a 50/50 chance of a cut in December, so the data will have the final say.
I don't think the September NFP expected to be released next week is going to matter much if it's soft given that it's old data, but a strong report might be taken as meaningful because the market could think that conditions were already getting better in September before the two rate cuts.
Therefore, I think the November NFP is going to have the final say, which will hopefully get released just before the FOMC meeting in December (we won't get the November CPI in time).
On the GBP side, the BoE held the Bank Rate steady with a 5-4 vote split as BoE’s Breeden joined the doves and voted to cut rates by 25 bps. The first reaction was dovish as pretty much everything suggested that a rate cut in December was almost a sure thing.
In the press conference though, BoE Governor Bailey sounded like a December cut was conditional on a confirmation of the improvement in inflation. The latest employment report missed across the board and raised the probabilities for a December cut to 80%. The BoE will get another employment report, and two inflation reports before the next meeting, so they will have enough data to make a better decision.
The pound today has been all over the place as we got reports that UK’s Chancellor Reeves is not going to raise taxes in the Autumn Budget coming on November 26.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that GBPUSD reached the 1.32 handle before pulling back a bit. That’s where we can expect the sellers to step in with a defined risk above the major trendline to position for a drop into new lows. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into the 1.34 handle next.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a strong support zone around the 1.31 handle where we got several rejections in the past days. If the price gets there again, we can expect the buyers to step in with a defined risk below the support to position for a rally into the major trendline targeting a breakout. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into new lows.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, there’s not much else we can add here as the buyers will look for longs around the support, while the sellers will look for shorts around the major trendline or on the break below the support. The red lines define the average daily range for today.
