Another test of 1.2000 remains in the books

  • GBPUSD attempted to build bullish momentum while holding above 1.1900.
  • UK Chancellor Hunt will present the autumn budget later today.
  • The short-term technical outlook suggests the pair could test 1.2000.

GBPUSD managed to regain momentum and climbed above 1.1900 early Thursday. The technical chart suggests that sellers remain on the sidelines as markets wait for UK Chancellor Jeremy Hunt to present the autumn budget.

During testimony before the UK Treasury Select Committee, Bank of England (BOE) Governor Andrew Bailey said they would likely raise interest rates further. This comment, however, did not give the pound a boost as Bailey also acknowledged that they were seeing signs that the supply chain shock was starting to fade.

Hunt is expected to announce a package of tax hikes and spending cuts of £25billion and £35billion, respectively, to put public finances on a “sustainable path” as he calls it. Should the autumn budget include even bigger spending cuts or tax hikes, the pound could lose interest as investors price in less aggressive policy tightening from the BOE and vice versa.

On the other hand, the United States Stock index futures are up 0.2% to 0.4% during the European session, indicating an improvement in market sentiment.

In the second half of the day, October housing starts, building permits and weekly data on initial unemployment insurance claims from the United States (United States) will be sought for further impetus. This data is unlikely to significantly influence market prices for the Federal Reserve’s upcoming rate decision. Therefore, investors will keep a close eye on Wall Street. If risk flows begin to dominate financial markets in the US session, American dollars (USD) could continue to weaken and open the door for another leg higher in GBPUSD.

GBPUSD Technical Analysis

The GBPUSD pair is trading in the ascending regression channel from November 3rd. As long as the lower boundary of this channel, currently at 1.1900, remains intact, buyers are likely to remain interested. On the upside, 1.1950 (static level) lines up as intermediate resistance before the pair can target 1.2000 (psychological level) and 1.2030 (15th November high).

With a four-hour close below 1.1900, further losses towards 1.1850 (20-period simple moving average (SMA) on the four-hour chart) and 1.1800 (psychological level, static level) could be seen.