POUND STERLING ANALYSIS & TALKING POINTS

• Global external factors weighs on GBP.
• UK housing and credit data under the spotlight today.
• Technical analysis favors more pound weakness.

GBPUSD FUNDAMENTAL BACKDROP

The British pound ended the previous week on the backfoot as inflationary pressures in the UK via the labor market softened in conjunction with weak PMI preliminary data.

The ongoing war between Israel-Hamas remains volatile and will ultimately safe haven currencies like the USD over sterling. Cracks in global stock markets have also contributed to souring risk sentiment as corporate earnings disappoint.

With the Bank of England (BoE) and Federal Reserve interest rate decisions in focus this week, of which none of the respective central banks are expected to hike rates. Emphasis will be placed on revised forecasts and guidance in terms of possible policy shifts.

BOE INTEREST RATE PROBABILITIES

Source: Refinitiv

TECHNICAL ANALYSIS

GBP/USD DAILY CHART

Chart prepared by Warren Venketas, IG

GBP/USD price action holds above the 1.2100 psychological level for now with trendline support nearby. After the death cross (blue) formation earlier this month, downside has been slight but can breakdown further if the aforementioned support zones are breached. Last week’s weekly candle closed with a long upper wick and may add to the bearish bias short-term.

Key resistance levels:

• 200-day MA (blue)
• 50-day MA (yellow)
• 1.2308
• 1.2200

Key support levels:

• 1.2100
• Trendline support
• 1.2000
• 1.1804

MIXED IG CLIENT SENTIMENT (GBP/USD)

IG Client Sentiment Data (IGCS) shows retail traders are currently net LONG on GBP/USD with 72% of traders holding long positions (as of this writing).

https://www.dailyfx.com/news/forex-pound-price-forecast-upcoming-boe-expectations-keep-gbp-subdued-wv-20231030.html