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
GBPUSD daily
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
GBPUSD 4 hour
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
GBPUSD 1 hour
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.
