This month, GBP/USD has shown some strong bullish reversal signs, but efforts to reverse the trend have failed at moving averages, with the last attempt ending yesterday. This currency pair was bearish for several months until the beginning of October, when it nearly reached 1.20. We saw some consolidation above that big mark in October, and buyers are attempting to take control of this pair in November, albeit they have found many obstacles on the way up.
Despite a general dearth of bullish factors, the GBP continues to make higher highs and higher lows nonetheless, clawing back lost territory after the pair fell for the most of the first half of the year. Recent price increases have been predominantly driven by USD sell-offs triggered by poor fundamental data from the world’s largest economy. The pair has slipped down in the days since the big surge on Tuesday following better-than-expected US inflation figures.
The UK CPI inflation figures reported earlier this week were softer than predicted, which is a reason for the GBP to be soft, although the Bank of England is not looking to cut interest rates right now, as MPC member Greene said yesterday. So, the 100 SMA is acting as resistance and rejecting the price for GBP/USD right now, which is a negative indicator.
Remarks by BOE policymaker, Megan Greene
- I am not thinking about rate cuts
- Latest inflation data is good news
- But there are reasons to worry about inflation persistence
- We might need to stay restrictive for longer
- UK wage growth is still incredibly high
- Need to see how UK activity is holding up before next rate vote
Given that there is still some way to go before inflation gets towards the 2% target, we shouldn’t expect policymakers to change their language any time soon. The inability to push above the 100-day moving average adn hold above 1.25 is also a problem for the buyers. The sellers are staking a claim to control by leaning against those levels. Those laws a price can remain below those levels, the downside remains the technical bias. On the downside, the next target comes in at 1.2368 followed by 1.2336