Nov 01, 2022

VOT Research Desk

Following a massive comeback from 1.1460 in the early European session, the GBP/USD pair is seeking to continue its recovery above the immediate hurdle of 1.1517.

The cable has been strengthened as the risk-on impetus has firmly rebounded. Investors are putting their money in risky assets as the uncertainty surrounding Federal Reserve (Fed) policy fades. Following a negative Monday, the S&P500 futures have rebounded significantly.

The 10-year US Treasury yield is at 4.02%. In the meantime, the US dollar index (DXY) is attempting to extend its losses below the intraday low of 111.28.

Pound bulls are preparing for a 75 basis point (bps) rate hike by the Bank of England (BOE). To bring double-digit inflation under control, BOE Governor Andrew Bailey has no choice but to tighten policy with a larger rate hike.

The 75 bps rate will have the most impact in the current rate escalation cycle.

The UK’s new administration is working hard to end the debt issue. Treasury insiders told the Financial Times on Monday that UK Prime Minister Rishi Sunak and Chancellor Jeremy Hunt had agreed that those with the widest shoulders should be expected to carry the most weight, and that everyone’s taxes will rise.

They also stated that the administration feels that the fiscal hole in the economy caused by helicopter money pumped into the economy to combat Covid-19 and assist households with energy expenses must be filled. Furthermore, spending cuts are rarely sufficient to close the fiscal gap.

On the domestic front, the Fed is projected to continue its 75 basis point rate hike streak for the fourth time, raising rates to 3.75-4%, a step closer to accomplishing the price stability goal.

On Tuesday, investors’ attention will be focused on ISM Manufacturing PMI data, which is expected to be lower at 50.0 compared to the previous release of 50.9.

Oct 28, 2022

VOT Research Desk

In the Tokyo session, the GBP/USD pair recovered from 1.1550 and is now attempting to retake the immediate resistance level of 1.1600.

The US dollar index (DXY) has experienced a fall after failing to maintain above 110.50, and this has prompted bids for the cable.

After a sharper decrease, the 10-year US Treasury yields are currently stabilizing around 3.93%. The risk impulse is reacting in a conflicted manner as S&P500 futures have carried over their Thursday’s gloomy feeling.

The likelihood of the Federal Reserve (Fed) announcing a larger rate hike have drastically decreased, hence the DXY is performing studiedly in Asia.

The likelihood that the Federal Reserve (Fed) will raise interest rates by 75 basis points (bps) has decreased even more, to 85.5%, according to the CME Fed Watch tool.

The drop in consumer expenditure in the third quarter is what has caused a paradigm shift toward a less aggressive policy posture.

According to the GDP statistics for the third quarter, consumer expenditure increased by 1.4%, which is less than the previous expansion of 2.0%. Consumer spending is slowing down, which suggests that inflation will soon reach its high, driven by a decline in consumer demand.

It is important to note that consumer spending represents. The UK is facing its greatest level of debt since 1960, and new UK Leadership under PM Rishi Sunak and Chancellor Jeremy Hunt is attempting to bring financial stability.

Financial Times reports state that Sunak is considering tax increases and spending reductions of up to GBP 50 billion, which is consistent with the bank of England’s (BOE) goal of achieving price stability.

Oct 27, 2022

VOT Research Desk

The GBP/USD pair does not respond much to the mixed US macro reports during the early North American session because it is still on the defensive.

However, the pair manages to recover a few points from the daily low and is currently trading in the 1.1570-1.1575 range, down over 0.50% so far today.

The US dollar quickly recovers from a one-month low hit earlier this Thursday, making a strong turnaround, which puts some downward pressure on the GBP/USD pair.

The US dollar’s demand is boosted by a goodish increase in US Treasury bond yields and a stronger-than-expected US GDP report. The largest economy in the world increased at 2.6% annualized pace during the third quarter, according to the US Bureau of Economic Analysis, exceeding estimates that pointed to a reading of 2.4%.

To make matters worse, US Weekly Jobless Claims increased from 214K to 217K during the week ending October 21, above market predictions of 220K.

However, this was countered by disappointing Durable Goods Orders, which increased 0.4% in September instead of the expected 0.6% growth.

In contrast to the previous month’s flat reading and the small 0.2% increase predicted, new orders decreased by 0.5% when transportation is excluded. The data falls short of satisfying USD bulls or igniting new selling activity around the GBP/USD pair.

In addition, the anticipation around the appointment of Rishi Sunak as the new prime minister of the United Kingdom boosts the value of the British pound.

As a result, it is wise to wait for significant follow-through selling before concluding that the recent surge in the GBP/USD pair has peaked and preparing for any future losses.

Oct 26, 2022

VOT Research Desk

In the last hour, the GBP/USD pair has seen new bids during the early European session, rising to its highest level since September 14 in the 1.1575-1.1580 range.

The selection of Rishi Sunak as the next British prime minister was well received by investors.

This is seen by a continued drop in UK gilt yields, which support the British pound. In addition, the pervasive US dollar-selling bias gives the GBP/USD pair an extra boost and keeps the trend going.

In fact, as expectations for a more aggressive tightening by the Fed decline, the USD Index, which gauges the performance of the dollar against a basket of currencies, plunges again closer to the monthly  low.

The world’s largest economy is showing symptoms of slowing down, according to Tuesday’s dismal US macro data, which may prompt the Fed to tone down its aggressive approach.

The recent decline in US Treasury bond rates is extended as a result of the Fed reprising its rate-hiking path, which is perceived as impacting on the US dollar. Additionally, indications of market stability lessen the dollar’s reputation as a safe haven and raise the possibility of future GBP/USD appreciation.

GBP/USD Technical Analysis

A decisive break through the 1.1480 supply zone and a subsequent advance past the psychological level of 1.1500 provide credibility to the optimistic view, even from a technical standpoint.

However, concerns over a deepening global economic recession might dampen the excitement and prevent bulls from making risky wagers on the GBP/USD pair.

Market players are now anticipating the publication of US new home sales data.

This will push the USD and give the GBP/USD pair some momentum ahead of significant US macro announcements on Thursday, coupled with the US bond rates and the general risk attitude. Next week’s FOMC meeting and NFP report will then come into focus.

Oct 24, 2022

VOT Research Desk

After reverting from the greatest levels in a week, GBP/USD remains defensive near a one-month support line, trading at 1.1300 early on Monday morning in Europe.

The Cable pair then declines back towards an upward-sloping support line from September 28 and reverses from the 50-DMA.

The GBP/USD prices are anticipated to stay firmer till shattering the previously noted immediate support line of 1.1230, given the positive MACD indications and the stable RSI.

The 21-DMA level around 1.1155 and the one-month-old horizontal support near 1.0935 might pose a challenge to the GBP/USD bearish even if the price dips below 1.1260 supports. It should be noted that the record low of 1.0339 will be directly challenged by a clear negative breach of 1.0935.

The 1.0650 and 1.0540 levels, however, may provide temporary halts during the descent.

As an alternative, a clear upward breach of the 50-DMA resistance level at 1.1415 would encourage GBP/USD investors to move for the monthly high at 1.1490.

Following that, other hurdles to the north for the GBP/USD pair buyers to watch include the 61.8% Fibonacci retracement level of the pair’s falls from August to September and September’s top, which are roughly located around 1.1545 and 1.1740 in that order.

Oct 19, 2022

VOT Research Desk

Although the GBP/USD pair has recovered from its two-day low of 1.1245, strong selling pressure will still be present below 1.1300 on Wednesday. Before starting off the following leg below, bears are having a break.

After the government’s economic U-turn and continued political unrest, markets are pricing in a less aggressive BOE rate rise despite the higher-than-expected annualized UK CPI. The pound is suffering as a result of these worries about an impending recession.

On the other hand, investors have become more cautious, which has rekindled global demand for the US dollar as a safe haven. The increase in US Treasury rates is also favoring the dollar at the expense of the pound.

The US housing statistics, Fedspeak, and the Beige Book are currently the main areas of attention for new trade dynamism. The risk-sensitive cable will be significantly impacted by the US earnings reports.

The declining trend line resistance, which is currently around 1.1360, presented GBP/USD with rejection from a short-term technical standpoint once more.

Should Monday’s low at 1.1171 hold, the sell-off is therefore expected to continue into the negative 21-Daily Moving Average (DMA) at 1.1140.

A turn in the tide against bulls is indicated by the 14-day Relative Strength Index (RSI), which is lurking just below the midline. For any rebound to materialise on the upside, acceptance over the aforementioned barrier at 1.1357 is essential.

Bulls are expected to stop at the round number 1.1400 next; if they do, the declining 50DMA at 1.1466 may be challenged.

Oct 05, 2022

VOT Research Desk

Analytical Viewpoint

Risk aversion causes the GBP/USD to fall below 1.1400.

Following the remarkable gain seen earlier in the week, GBP/USD changed course and dropped under 1.1400 in the early hours of Wednesday.

While investors wait for the US ADP jobs and ISM Services PMI data, the gloomy market environment drags on the pair. In the Tokyo session, the GBP/USD pair provided a negative break of the consolidation built in a range between 1.1420 and 1.1490.

The asset is anticipated to decline much lower, possibly approaching the round-level support of 1.1400, as a correction was widely anticipated following a powerful surge. The corrective move, meanwhile, is anticipated to be minor and have little effect on the positive bias on longer time frames.

The tax cut action was creating a conflict of interest since, on the one hand, the Bank of England (BOE) is steadily raising interest rates to rein in the inflation.

The rollback decision has shown that, after Liz Truss is elected prime minister, the UK economy still needs time to become politically stable. The US dollar index (DXY) is now seeing resurgence after holding onto the pivotal support level of 110.00. Due to the lack of strength, the rebound action appears less trustworthy and will end sooner.

The US ISM Services PMI statistics will take center stage moving ahead. People have delayed their demand for durable items, therefore it is anticipated that the economic data would show a fragile performance. The Services PMI data is predicted to drop from its previous reading of 56.9 to 56.0. Additionally, the New Orders Index data, which predicts future demand for services, will drop to 58.9 from 61.8 in the previous edition.