GBP/USD: Pound's potential is limited ahead of Powell, more falls on the cards

FXStreet Insights Team FXStreet

GBP/USD has been on the back foot, struggling to hold onto 1.37. Its weakness is exposed as the pound is poorly positioned ahead of an expected dovish speech by Fed Chair Powell, FXStreet’s Analyst Yohay Elam briefs.

See – GBP/USD: The 1.40 level is out of sight – Rabobank

Pound technicals and fundamentals point lower

“There are several reasons for sterling's suffering. UK COVID-19 cases have extended their increase, topping 38,000 in Thursday's report. Another issue is Brexit-related – shortages in some supermarkets due to the inability of companies to find lorry drivers and also butchers. The third factor comes from the terror attacks in Afghanistan. The dollar is benefiting from safe-haven flows – and these are more pronounced against the pound.”

“To taper or not to taper? Fed Chair Powell will probably opt to delay any announcement. He will likely be able to hold back the vocal hawks for a bit longer. Ahead of his speech, the US releases the Core PCE inflation figure which is set to show a modest uptick from 3.5% to 3.6% YoY.”

“GBP/USD has been unable to reconquer the 50 Simple Moving Average on the four-hour chart, a development that exacerbates downside momentum and the fact that it earlier failed to top the critical 1.3785 resistance line.”

“Support awaits at the daily low of 1.3680, followed by 1.3635 and then by 1.36, August's trough.”

“Resistance is at 1.3750, which capped a recovery attempt early in the week, and then by the almighty 1.3785 line.”

AUD/USD looks firm; focus is on 0.7000

AUD/USD starts the week on a positive footing, approaching the 0.7000 hurdle helped by renewed sentiment following firmer-than-expected GDP data from China. Meanwhile, the continuation of the pair’s recovery also comes in contrast with the decent advance in the Greenback, which regains some traction followong last weeks pullback.

USD/JPY struggles near 158.00 amid hawkish BoJ, subdued USD

USD/JPY remains defensive near 158.00 in the Asian session on Monday, as the US Dollar remains depressed near a two-week low amid the recent decline in US bond yields. Furthermore, looming intervention risks underpin the Japanese Yen and weigh on the pair amid BoJ Governor Kazuo Ueda's hawkish remarks. However, Fed rate-hike bets and geopolitical uncertainties could limit USD losses and the major.

Gold drops to daily lows below $4,150

Gold builds on Friday’s retracement and slips back below the $4,150 mark per troy ounce on Monday. The better tone in the US Dollar and a decent bounce in US Treasury yields across the curve keep the yellow metal under pressure for now.

XRP struggles at support as ETF outflows and bearish momentum cloud recovery outlook

Ripple (XRP) holds slightly above $1.30 on Monday, with short-term recovery prospects fading. Strong structural resistance toward $1.40 continues to cap upside, raising the risk of further downside below $1.30.

Higher than expected inflation shakes markets: What to prepare for?

US CPI report came in stronger than expected, lifting the probability of a December rate hike higher once again. Even though Fed Chair Warsh reinforced expectations of a hold for the October’s meeting, markets now face a two-step event: a likely pause on October 28, followed by an interest rate hike on December 9.

The US Dollar fell. Gold didn't rally. That tells you everything

Gold (XAU/USD) is struggling to capitalize on a weaker US Dollar (USD), after repeatedly failing to establish itself above the $4,200 level. The precious metal remains confined to a relatively narrow trading range despite a combination of developments that would normally support higher prices.