GBPUSD Forecast

GBPUSD Forecast: Pound’s next move depends on BoE buyback operations, US CPI

(Eren Sengezer – FXStreet)

– GBP/USD has gone into a consolidation phase following Wednesday’s volatile action.

– Investors keep a close eye on the outcome of the BoE’s daily buyback operations.

– September CPI data will be featured in the US economic docket.

GBP/USD has started to move sideways in a narrow channel near 1.1100 on Thursday after having managed to snap a five-day losing streak on Wednesday. The outcome of the Bank of England’s (BoE) daily buyback operations and the Consumer Price Index (CPI) data from the US could ramp up the pair’s volatility in the second half of the day.

Reports of senior Conservative members of Parliament pressuring British Prime Minister Liz Truss to rethink the mini budget and make adjustments seem to be helping the British pound stay resilient against its rivals in the second half of the week.

Meanwhile, BoE Chief Economist Huw Pill said that he is still inclined to believe that significant monetary policy response will still be required in November, providing an additional boost to the sterling.

Nevertheless, as the BoE nears the end of its emergency gilt-purchase operation, investors could refrain from betting on further pound strength amid concerns over another crisis in the gilt market next week. On Wednesday, the BoE announced that it accepted 1.96 billion and 2.37 billion pounds of offers in index-linked and long-dated gilt purchases, respectively. In case the bank accepts a larger amount of offers in Thursday’s daily operations, UK gilt yields could push lower and allow the GBP to hold its ground in the near term.

The dollar’s market valuation in the American session could also impact GBP/USD’s action. The US Bureau of Labor Statistics is expected to announce a 0.5% increase in the monthly Core CPI, which excludes volatile food and energy prices, in September. With a stronger-than-expected Core CPI print, the greenback could outperform the sterling amid the uncertainty surrounding the gilt market. A soft CPI report, on the other other hand, is likely to trigger a dollar selloff in the short term.

GBP/USD Technical Analysis

The technical outlook shows that GBP/USD is trying to turn bullish in the short term with the Relative Strength Index (RSI) indicator on the four-hour chart edging above 50. Additionally, the pair closed the last four-hour candle slightly above the 100-period SMA.

The pair needs to clear 1.1140 (Fibonacci 38.2% retracement level of the latest uptrend) before targeting 1.1200 (psychological level, 50-period SMA) and 1.1230 (Fibonacci 23.6% retracement).

On the downside, first support is located at 1.1030 (Fibonacci 50% retracement) before 1.1000 (psychological level). A four-hour close below the latter could be seen as a bearish development and open the door for an extended slide toward 1.0920 (Fibonacci 61.8% retracement).

GBP/USD outlook: Cable in a mixed mode on conflicting UK fundamentals, awaiting US inflation data

(Slobodan Drvenica – Windsor Brokers)

Cable is consolidating above two important supports at 1.1053/50 (Fibo 38.2% of 1.0348/1.1490 / psychological) following a short-lived dip below these levels and a quick rebound on Wednesday.

Near-term sentiment is mixed, as the Bank of England’s emergency bond buying program is scheduled to end on Friday, but the central bank signaled it could extend purchases if market conditions demand it.

On the other side, data released on Wednesday showed that Britain’s economy unexpectedly contracted in August, but economists still expect the BoE to continue to raise interest rates, in fighting the red-hot inflation, with wide expectations for 0.75% hike and 1% raise also being on the table.

Mixed fundamentals are complemented by conflicting daily studies, daily MA’s are in bearish setup but positive momentum is rising, with potential bear-trap under 1.10 to offer additional support.

Traders focus on today’s release of the US inflation data for September, which are expected to provide fresh direction signal.

According to forecasts, US consumer prices are expected to ease to 8.1% in September from 8.3% month, with release at / below consensus likely to cool expectations for very aggressive Fed in Nov 2 policy meeting and deflate dollar that would be supportive for sterling.

In such scenario, cable needs to rise and close above 1.1140 (20DMA / Fibo 38.2% of 1.1490/1.0922), to boost existing positive signal from Wednesday’s bullish engulfing pattern.

Conversely, pound would come under fresh pressure on higher than expected inflation figure and risk renewed probe below 1.10 zone that would signal continuation of a bear-leg from 1.15 double-top.

Res: 1.1139; 1.1209; 1.1276; 1.1360.
Sup: 1.1053; 1.1000; 1.0919; 1.0784.