GBP PRICE, CHARTS AND ANALYSIS:

• GBP/USD Needs Acceptance Above the 1.2200 Level for Bullish Continuation. DXY Remains a Stumbling Block.
• EUR/GBP Remains Rangebound Between the 0.8700-0.8500 Mark. Rising Wedge Pattern in Play.
• GBP/AUD Mixed as Price Action Offers Little Clarity. Improving Chinese Data Could Keep the AUD Supported and Facilitate a Deeper Retracement in the Coming Weeks.

The GBP has enjoyed a somewhat mixed day as it lost ground against the USD and the Australian Dollar while gaining against the Euro. Some would say surprising given the stickiness in the UK inflation data print this morning with the British Pound largely unfazed in the aftermath.

UK INFLATION AND BANK OF ENGLAND (BOE)

UK inflation data this morning did exhibit some positive signs and could explain the lack of bullish price action by the GBP. Market participants seemed to agree as the rate hike expectation for the Bank of England remain relatively unchanged following the CPI release. Higher petrol prices and sticky services inflation were the major contributors to the rise in inflation. There was a positive where food prices were concerned, falling across the board in what is the first MoM decline in 2 years. This certainly doesn’t appear enough to warrant a rate hike in November as the underlying risks from the Middle East fallout have yet to fully felt as well.

BoE Rate Hike Probability Distribution

Source: Refinitiv

The Bank of England (BoE) will also be paying attention to the PPI data which hints at further disinflation in food prices, an area of particular concern for both the Central Bank and the Government.

Looking ahead and without any stark change to the data moving forward (Yesterday average earnings throwing up no surprises) there is very little to suggest a change in policy from the Bank of England moving forward. Many analysts are also expecting a sharp drop in the October inflation data barring any surprises which adds further credence to a continued pause from the Bank of England (BoE).

RISK EVENTS AHEAD

Looking ahead to the rest of the week and we do not have a lot of high impact data releases on the docket. In the case of GBPAUD the Australian labor data will be released tomorrow and could aid a further recovery in the Aussie Dollar on a positive print. This after Chinese GDP this morning has kept the AUD largely supported throughout the day.

We also have a speech from Fed Chair Powell ahead of the weekend with next week actually bringing a host of high impact data releases from Australia, Europe and the United States which could provide some volatility and movement on all three GBP pairs.

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PRICE ACTION AND POTENTIAL SETUPS

GBPUSD

GBPUSD is struggling to regain the 1.2200 level this week failing to sustain above the level every day this week. The 20-day MA rests at around this level as well but the lack of bullish conviction may in part be attributed to the US Dollar continuing to hold the high ground as well.

For the moment GBPUSD has been stuck in a 100-pip range this week between the 1.2120 and 1.2220 range with a break above likely opening a run toward the descending trendline and resistance at the 1.2310 level.

Alternatively, a break below the 1.2120 mark could finally be the catalyst needed for a retest of the 1.2000 mark. This could hinge on further developments in the Middle East as further risk-off sentiment could boost the USD which will make life difficult for GBP bulls attempting a recovery.

GBP/USD Daily Chart

Source: TradingView, Prepared by Zain Vawda

Key Levels to Keep an Eye On:

Resistance levels:

• 1.2200
• 1.2250
• 1.2312

Support levels:

• 1.2120
• 1.2030 (weekly low)
• 1.2000

EURGBP

EUR/GBP Daily Chart

Source: TradingView, Prepared by Zain Vawda

From a technical perspective, EURGBP has been on a steady rise since bottoming out in the middle of August. However, the 0.8700 remains a stumbling block for bulls and has held firm since May last year.

For now, the 200-day MA adds further credence to the 0.8700 level while we also have a rising wedge patter in play. A break of the 0.8700 mark could potentially be a trap to clear short sellers before then reversing at the top end of the wedge pattern and may be worth monitoring. Personally, I would advise potential bulls to remain cautious until the upper end of the wedge pattern is broken as well as a daily candle close above the level.

Looking at the downside and a immediate rejection at the 0.8700 mark with immediate support resting at 0.8657, provided by the 20-day MA. A break lower then faces the lower end of the wedge pattern with a break lower opening up a retest of the 100-day MA.

GBPAUD

Looking at the GBPAUD pair and I am evaluating a weekly timeframe given the size of moves we usually see on the exotic pair. The weekly timeframe has broken the trendline and is making an attempt to continue the bullish run which began in October 2022.

This morning’s data from China is likely to complicate matters for GBPAUD buyers as a consistent recovery in China could further enhance the AUD.

Dropping to a daily timeframe and we have a death cross pattern last week which failed to facilitate a push lower with a new higher high being printed instead. This is indicative of the choppy price action we are seeing in GBPAUD of late with a new leg to the upside still plausible looking at the price action on a daily timeframe.

Key Levels to Keep an Eye On:

Resistance levels:

• 1.9205
• 1.9380
• 1.9500

Support levels:

• 1.9000
• 1.8850
• 1.8690 (200-day MA)

GBP/AUD Weekly Chart

Source: TradingView, Prepared by Zain Vawda

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