GBP/USD recovers from daily lows hover around 1.3750
|- Market sentiment is downbeat as investors weigh the Q4 economic outlook and US fiscal policy woes.
- UK’s Treasury reveals a 75 Billion pound budget, slashed taxes to pubs and restaurants.
- UK’s economy to grow 6.5% by the end of the year.
- US Durable Good Orders were better than expected but contracted.
The GBP/USD edges lower during the New York session, down 0.12%, trading at 1.3748 at the time of writing. The London fix lifted the pair as traders suddenly increased the bets on cable, jumping from 1.3720 to current levels.
Factors like month-ending flows, portfolio reshuffling, economic growth concerns, and US fiscal policy woes kept investors’ mood negative, as witnessed by US equity indices falling. Safe-haven currencies like the Japanese yen, the Swiss franc, and the US Dollar benefit on a flight to safe-haven flows.
During the European session, Rishi Sunak, the Chancellor of the Exchequer, revealed a 75 Billion pound budget in which he slashed taxes for pubs and restaurants, cut duties on alcohol, and increased support for the nation’s poorest, he said in a statement on the Parliament.
Furthermore, UK’s economy contracted almost 10% in 2020, but it is set to grow 6.5% by the end of the year, according to the Office for Budget Responsibility (OBR). Also, the OBR expects inflation to average 4%, double of the Bank of England’s target, which the Bank of England has been aware of, as some policymakers had expressed concerns about elevated prices.
An absent UK economic docket leaves GBP/USD traders at the dynamics and developments around the greenback. Meanwhile, in the US economic docket, Durable Good Orders for September contracted by 0.4%, less than the 1.1% expected by analysts. On the other hand, the Nondefense orders, excluding aircraft, expanded by 0.8%, higher than the 0.5% estimated.
That said, GBP/USD trader’s focus turns to the US Gross Domestic Product for the Q3, expected at 2.5%, to be unveiled on Thursday. On Friday, the Fed’s favorite inflation measure, the PCE, will be revealed. Good numbers out of those readings would be positive for the greenback.
GBP/USD Price Forecast: Technical outlook
Daily chart
The GBP/USD pair is in a mild-bearish trend, depicted by the daily moving averages (DMA’s) above the spot price, except for the 50-day moving average at 1.3705 that was tested early in the day.
Furthermore, Tuesday’s price action depicted a grave-stone doji indicating selling pressure mounting on the pair but failed to break below the 50-DMA at the time being.
The Relative Strength Index (RSI) is at 52, aims lower, indicates the downward trend might accelerate but, a pierce of the 50-mid line is required to confirm the abovementioned.
A daily close below the 50-DMA could send GBP/USD tumbling below 1.3700. Key support levels lie ahead on the way south. The first support would be the April 12 low at 1.3669, followed by the October 12 low at 1.35.67, and then the 2021 low at 1.3411.
GBP/USD ADDITIONAL TECHNICAL LEVELS
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