GBP/USD Retesting the 200 Daily SMA as the USD Falls
Following a month of stabilization in October, the GBP/USD pair seems to be making a bullish reversal this month, as buyers push the price above moving averages which are turning into support on the daily timeframe. This pair has been bearish since July, however, this month has seen some strong bullish reversing indicators, with higher highs and higher lows. Despite this, the British economy is still failing, which should keep the Pound weak, but on the other hand, the FED is widely expected to keep rates unchanged, as inflation slows in the US, with both the US CPI (consumer price index) and the PPI (producer price index) coming below expectations last week.
Moving averages have been operating as resistance, but once buyers have forced the price above, they have become supportive. The most recent effort halted last week at the 200 SMA (purple), following the USD’s 200-pip decline in response to the rise that followed the milder US CPI inflation news.
Despite the 200 SMA’s rejection, the 100 MA (green) stayed as support, and the price bounced above it once more on Thursday following the formation of a doji. Buyers faced the 200 SMA once more yesterday, and it appeared as though they might break above it because the price quickly increased again.
The price of the GBP/USD increased above the 1.25056 level and the swing area between 1.2524 and 1.2547 would be the next levels to reach, giving buyers greater confidence. Closing above that level would be more optimistic. Technical obstacles are being broken by buyers, indicating a more positive trend. Earlier on we had the Monetary Policy Report Hearings from the Bank of England’s last meeting, although they didn’t have much impact on the GBP. Yesterday BOE governor Andrew Bailey made some hawkish comments, saying that it’s too early to be thinking about rate cuts.
Bank of England Governor Andrew Bailey Speaking
- Far too early to be thinking about rate cuts
- Returning inflation to 2% target remains our absolute priority
- When inflation is high, we take no chances
- The tragic events in the Middle East have added upside risk to energy prices
- Labor market remains tight despite softening recently
- Wage inflation remains elevated.
- We must be alert to any second-round effects of higher food and energy prices
- The evolution of food prices will matter for wage growth looking ahead
- The squeeze on real incomes from higher food and energy prices may still be influencing wage demands
- Inflation data for October released last week were welcome news, it’s much too early to declare victory.
- We must watch for further signs of inflation, persistence and that may require interest rates to rise again.
- How long a restrictive stance will be needed will ultimately depend on what incoming data tells us
- The MPC ‘s latest projections indicate that monetary policy is likely need to be restrictive for quite some time yet
GBP/USD Live Chart
ABOUT THE AUTHOR
See More
Sidebar rates
Related Posts
Save
Join 350 000+ traders receiving Free Trading Signals
Alerts
Rates
Calendar
Signals