Key Support Levels
Support 1: 1.3015 which is recent swing low marked this week.
Support 2: 1.3000, a psychological price level supporting the pair for the time being.
Support 3: 1.2950, swing low area coincided with the 100-day SMA.
Key Resistance Levels
Resistance 1: 1.3093, a recent swing high marked on the CPI day.
Resistance 2: 1.3100, a psychological mark that could prevent the upside for the time being.
Resistance 3: 1.3150, a horizontal level and a round number.
GBP to USD Fundamental Outlook
The US CPI figures dropped to 2.4% YoY in September, down from 2.5% in August. However, the core CPI, which is volatile due to the inclusion of energy and food prices, remained high. It hit 3.2% YoY, from 3.2% in August. It shows consistent inflationary pressure.
Another unexpected development was the US Initial Jobless Claims that went up to 258k in the last week. It’s the highest level since June 2023 which shows a softer tone in the labor market.
The mixed data has spurred some confusion in the markets as the soft jobs market may push the Fed for aggressive rate cuts while the uptick in core inflation could still ask to maintain higher interest rates. As per the CPE FedWatch Tool, 90% probability exists for the 25-bps rate cut in the November 7 meeting.
From the UK, the GDP MoM data was released early on Friday. The numbers came at 0.2% that met expectations. The pounds to dollars price recovered some ground. However, the data was not strong enough to give buyers a reason to spark a meaningful rally. The move was reversed as soon as the London session progressed.
The Bank of England’s potential rate cut during the month may also keep the pound under pressure. However, the Fed’s 50-bps cut this year and BoE’s pause may change the recent sentiment. The rally started in June amid Fed’s dovish outlook could seems to pause and correct lower before a potential upside continuation. Not to forget, 2024 is an election year and the US elections have always resulted in a volatile move across the forex arena.
Final Thoughts
The GBP/USD has remained in a downtrend since last week. The pair seems vulnerable as the US Core CPI data has ticked higher. The traders should cautiously look for the coming events like US PPI to figure out further development on Fed’s outlook. Technically, the downtrend could pause around 1.2950 – 1.3000. However, the uncertain market conditions may trigger a bearish continuation.
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