(Eren Sengezer – FXStreet)
– GBPUSD has staged a rebound and reclaimed 1.1200.
– Near-term technical outlook suggests that the pair is staging a technical correction.
– Focus shifts to US October jobs report following central bank events.
After having suffered heavy losses against the US Dollar (USD) on Thursday, the British pound has managed to find demand early Friday. GBPUSD’s near-term technical outlook doesn’t offer any hints of a steady rebound and the USD’ valuation in the second half of the day is likely to impact the pair’s movements.
As expected, the Bank of England (BOE) raised its policy rate by 75 basis points (bps) to 3% following the November policy meeting. In its updated projections, however, the bank noted that it was expecting a two-year-long recession, rather than the five-quarter recession forecasted in August. More importantly, the policy statement revealed that the peak rate was projected to be lower than 5.2% priced into markets.
The BoE’s gloomy growth outlook and cautious tightening outlook triggered a Sterling selloff during the European trading hours, causing GBPUSD to slump t its weakest level since October 21 at 1.1150.
Early Friday, the improving mood on renewed optimism about China easing coronavirus restrictions makes it difficult for the US Dollar to outperform its rivals as a safe haven. Mirroring the risk-positive market atmosphere, US stock index futures are up between 0.2% and 0.5%.
Ahead of the weekend, the US Bureau of Labor Statistics’ October jobs report will be watched closely by market participants. Investors expect Nonfarm Payrolls (NFP) to rise by 200,000. The Federal Reserve’s hawkish stance largely depends on inflation and developments in the labour market. In case NFP misses the market expectation, the initial market reaction could cause the USD to continue to lose interest and help GBPUSD edge higher.
Nevertheless, the BoE’s and the Fed’s decisions this week highlighted the widening policy divergence between these two central banks, suggesting that GBPUSD’s recovery attempts are unlikely to gather momentum.
GBPUSD Technical Analysis
GBPUSD failed to break above the 200-period SMA on the four-hour chart, which is currently located at 1.1230. The pair needs to rise above that level and start using it as support for sellers to step to the sidelines. In that scenario, 1.1275 (static level) and 1.1330 (static level) could be seen as next resistance levels.
On the downside, 1.1150 (static level) aligns as initial support before 1.1100 (static level, psychological level) and 1.1060 (October 21 low). It’s worth noting that the Relative Strength Index (RSI) indicator on the four-hour chart stays near 30, confirming that the bearish bias stays intact despite the latest recovery attempt.
GBP under pressure
(Jing Ren – Orbex)
GBP/USD turns lower
The pound tumbled after the BoE warned of a protracted downturn. The price lost steam near September’s high (1.1700) and a break below 1.1440 sent buyers packing, turning it into a resistance. A lack of bids at the base (1.1300) of a recent bullish breakout is a warning sign that sentiment has gone cautious. 1.1100 is an important support and after the RSI sank to the oversold area, a ‘buying-the-dips’ behaviour could be expected. However, its breach could make Sterling vulnerable to renewed selling pressure.
USD/NOK lifts resistance
The US dollar retains the momentum from the hawkish Fed meeting. The pair has been in a flag-shaped consolidation after it broke above April 2020’s high at 10.8000. The optimism remains intact in the medium-term and the latest catalyst rally could be a signal for a bullish continuation. A surge above 10.5500 has flushed out short interests. 10.7000 is a key resistance and a breakout would cause a runaway rally above 11.0000. 10.4000 is the immediate support on a pullback after the RSI showed overextension.
NAS 100 tests critical floor
The Nasdaq 100 slumps as fewer US jobless claims reinforces the tightening agenda. Previously, a tentative break below 10900 weakened the bulls’ position. A failure to achieve a new high above 11650 shows that the path of least resistance would be down. A sharp drop below the said support has definitely knocked out the buy side. A rebound is likely to be capped by 11060. 10450 would be the last level to salvage the situation. A bearish breakout could trigger a new round of sell-off and effectively resume the bear market.