- GBP/USD is currently range-bound, consolidating within a narrow 30-pip range.
- US CPI and PPI data releases on Thursday and Friday could introduce some volatility.
- From a technical standpoint, the medium-term outlook still favors USD bulls, but a short-term bounce in GBP/USD is looking appealing.
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GBP/USD is in uncharted territory if i may so with the pair confined to a 30 pip range since early Monday morning. Cable is notorious for its significant moves in comparison to its major counterpart, EUR/USD.
However, As markets have grappled with shifting rate cut expectations from both the Federal Reserve (FED) and the Bank of England (BoE), GBP/USD has been relatively subdued to say the least. Of course the lack of high impact UK data releases has not helped matters, while a strong US Dollar and lack of US Data in the early part of the week have contributed as well.
Markets have already started preparing for the first budget from new Chancellor Rachel Reeves, expected October 30. Given the changes of late on the outlook for both Central Banks it appears the US Dollar will continue to find support ahead of the US election. This may leave cable vulnerable to further downside in the coming weeks.
Economic Data Ahead
There is quite a bit of data ahead this week which could impact GBP/USD. A busy end to the week starts with the Fed minutes release later in the day which to me seems to be shaping up as a non-event.
Market participants may be keen to gauge the debates that led to a 50 bps cut in September, however the minutes are unlikely to have an impact moving forward. Given that the jobs data sent markets on a 360 roundabout, the entire narrative has since shifted, rendering the minutes somewhat irrelevant at this stage.
Thursday and Friday will bring US CPI and PPI data which could stoke a bit of volatility. Barring any significant uptick in inflationary pressures, this release is unlikely to alter the medium term narrative.
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Technical Analysis
Looking at GBP/USD from a technical standpoint, the four-hour chart below shows the red box within which price has been confined since Monday morning.
A four-hour candle close to either side of the box could be seen as a potential breakout. However, given the fact that the US Dollar has been on a tear this week, could we be in for a potential midweek reversal?
Should a midweek reversal come to fruition on the US Dollar, then we could see GBP/USD break to the upside. Any rally higher does face significant hurdles but my gut says that this could materialize in the next day or two.
Immediate resistance on the upside rests at 1.31050 before the 1.3143 handle and the 200-day MA at 1.3200 come into focus. Conversely, a move lower here needs to navigate past the previous swing low around 1.3040 before the psychological 1.3000 handle is reached.
All in all the medium term outlook still favors USD bulls. However, looking at the price action picture and a short-terms retracement higher is beginning to look more and more likely.
GBP/USD Four-Hour H4 Chart, October 9, 2024
Source:TradingView.com
Support
- 1.3040
- 1.3000
- 1.2942
Resistance
- 1.3100
- 1.3143
- 1.3200 (200-day MA)
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Zain Vawda
He has spent the last 3 years in an analyst role honing his skills across various financial domains, including technical analysis, economic data interpretation, price action strategies, and analyzing the geopolitical impacts on global markets. Currently, Zain is advancing in obtaining his Capital Markets & Security Analyst (CMSA) designation through the Corporate Finance Institute (CFI), where he has completed modules in fixed income fundamentals, portfolio management fundamentals, equity market fundamentals, introduction to capital markets, and derivative fundamentals.
He is also a regular guest on radio and television programs in South Africa, providing insight into global markets and the economy. Additionally, he has contributed to the development of a financial markets course approved by BankSeta (Banking Sector Education and Training Authority) at NQF level 6 in South Africa.
