Oct 22, 2022
VOT Research Desk
Another eventful week in UK politics saw an approximately 300 pip movement in the GBP/USD currency pair. Liz Truss’ departure as British prime minister did provide purchasers of the GBP some peace of mind, but rising US Treasury rates limited the pair’s upward movement.
As markets prepare for a busy week, the disparity in policy between the BoE and the Fed also became apparent.
Political developments in the UK and anticipated Fed rate hikes will continue to be the main drivers. GBP/USD tested offers below the crucial short-term 21-Daily Moving Average (DMA) at 1.1128 before falling to its lowest point in six days at 1.1059.
The Fed officials are experiencing a blackout phase, which will highlight the latest economic data. In the next week, traders should prepare for big top-tier macro news from both sides of the Atlantic.
In addition, when a new Prime Minister is chosen, British political developments will be widely watched. With the release of the UK and US S&P Global Preliminary Manufacturing and Services PMIs on Monday, an exciting week gets off to a blazing start.
Later on in the day, US Treasury Secretary Janet Yellen is scheduled to speak in New York. On the political front in the UK, nominations will end on Monday at 14:00 GMT, and candidates must have the support of at least 100 MPs in order to run.
No MPs have openly declared their candidacy as of yet, although rumors suggest that Rishi Sunak, a former chancellor, and Penny Mordaunt, the speaker of the Commons, are contenders.
GBP/USD Technical Analysis:
This week, the downward break from the rising trend line support around 1.1205 prompted sellers to act.
Buyers eventually gave up a number of crucial support levels, including the 21DMA under strong downward pressure.
The GBP/USD pair will resume its general downward trend on a weekly close below the 21DMA, indicating a new decrease in price toward the low of 1.0923 on October 12. The low point of 1.0762 on September 29 is anticipated to be the next substantial cushion.
The fresh slump may have just started, according to the 14-day Relative Strength Index (RSI), which is edging downward below the midline.
On the other hand, any recovery in the major must persuade buyers over the former 21DMA support, which is now resistance.
The trend line support-turned-resistance, currently around 1.1253, is where the next recovery objective is expected. Bulls will be keeping an eye on the October 20 high at 1.1330 further up, which might lead to a new upsurge into the negative 50DMA around 1.1425.
The near-term bearish will be eliminated if acceptance rises above the latter.
