(Eren Sengezer – FXStreet)
– GBP/USD has advanced to a fresh 10-day high above 1.1600 on Friday.
– Broad-based dollar weakness helps GBP/USD stay bullish during the European session.
– UK PM Truss announced a two-year energy price guarantee on Thursday.
GBP/USD has gathered bullish momentum following Thursday’s indecisive action and advanced to its strongest level in over a week above 1.1600. The pair remains on track to snap a three-week losing streak and additional recovery gains could be witnessed as long as buyers continue to defend 1.1600.
During the European trading hours on Thursday, GBP/USD gained traction after British Prime Minister Liz Truss announced that they will introduce a two-year “energy price guarantee.” Truss explained that a typical household will pay no more than £2,500 a year on energy bills, translating into an annual saving of roughly £1,000 based on October prices.
In the second half of the day, the renewed dollar strength forced the pair to turn south but with risk flows returning to markets in the early Asian session on Friday, the greenback started to weaken against its major rivals. The US Dollar Index, which touched a multi-decade high of 110.78 on Friday, was last seen losing 1% on the day at 108.55.
Reflecting the upbeat market mood, the UK’s FTSE 100 Index is up nearly 1.7% on a daily basis. Moreover, US stock index futures are rising between 0.8% and 1% ahead of Wall Street’s opening bell.
The US economic docket won’t feature high-impact data releases on Friday. Before the Fed foes into the blackout period over the weekend, several FOMC officials, including Chicago Fed President Charles Evans and Kansas City Fed President Esther George, will be delivering speeches.
The fact that the CME Group FedWatch Tool points to a market pricing of a nearly-90% probability of a 75 basis points rate hike suggests that Fedspeak is unlikely to trigger a dollar rebound. Instead, investors will keep a close eye on risk perception.
GBP/USD Technical Analysis
1.1600 (psychological level, Fibonacci 23.6% retracement of the latest downtrend) aligns as key support for GBP/USD in the near term. In case the pair manages to hold above that level, buyers are likely to look to dominate the action. In that case, 1.1670 (100-period SMA) could be seen as the next bullish target ahead of 1.1700 (psychological level, and 1.1730 (Fibonacci 38.2% retracement).
On the downside, a drop below 1.1600 could attract sellers and trigger a downward correction toward 1.1550 (50-period SMA), 1.1530 (20-period SMA) and 1.1500 (psychological level).
In the meantime, the Relative Strength Index is holding comfortably above 50, reflecting a bullish shift in the short-term technical outlook.
GBP/USD outlook: Cable bounces to the highest in Sep on profit taking, weaker dollar
(Slobodan Drvenica – Windsor Brokers)
Cable jumps above 1.16 barrier on Friday, hitting the levels last traded on Aug 31, as dollar bulls started to lose steam, additionally deflated by intervention signals from Japan.
Fresh advance was sparked by a profit-taking after sterling hit the lowest in 37 years on Wednesday, but the action was strongly rejected at this zone and is likely to fail to register a weekly close below cracked key support at 1.1410 (2020 low).
Renewed optimism has been fueled by the action from new UK PM Liz Truss, who decided to cap soaring consumer energy bills for two years, to cushion strong negative impact from the energy crisis caused by the war in Ukraine and sanctions on Russia.
Improving daily techs on price’s rally above 1.1584/1.1610 pivots (10DMA / Fibo 23.6% of 1.2276/1.1405 bear-leg) and 14-d momentum in steep ascend, underpin near-term action.
The pair is on track for the first weekly gain after three consecutive weeks of losses, with initial positive signal to be boosted by close above 1.1600 zone, though verification of the signal will require extension and break of next key barrier at 1.1738 (Fibo 38.2%, reinforced by falling 20DMA).
Stronger recovery so far looks as a likely scenario, as weekly and monthly studies are oversold and fundamentals started to improve, although larger picture remains firmly bearish and the outlook is negative, suggesting that bounce would just provide better levels to re-enter bearish market.
Res: 1.1693; 1.1738; 1.1760; 1.1841.
Sup: 1.1610; 1.1584; 1.1536; 1.1497.