Current trend

The GBP/USD pair is retreating from its year’s highs, trading at 1.3114 amid the strengthening of the American dollar after the publication of statistics on the national labor market. The pound cannot move to a confident upward trend due to a disagreement among Bank of England officials.

Thus, Chief Economist Hugh Pill opposed the head of the department, Andrew Bailey, stating that a sharp reduction in interest rates could have an extremely negative impact on inflation, which had not yet reached target levels. Yesterday, the official hinted that the November meeting would consider the option of borrowing cost adjustment by –50 basis points or more. Despite the contradictions, the central forecast suggests a change by –25 basis points. Nevertheless, the decision will depend on the inflation data due at the end of the month. After a significant slowdown in the indicator, the likelihood of easing monetary policy will increase significantly.

The American dollar is trading near last week’s highs at 102.20 in USDX, supported by a decline in the unemployment rate from 4.2% to 4.1% amid an increase in nonfarm payrolls from 159.0K to 254.0K a month earlier. In addition, average hourly earnings increased by 0.4% MoM and 3.9% to 4.0% YoY in September. Earlier, US Fed Chairman Jerome Powell called for an end to the rapid interest rate cuts that would pose additional economic risks. Investors adjusted their expectations for the November meeting and a possible change in the indicator by –50 basis points. Previously, according to the Chicago Mercantile Exchange (CME) FedWatch Instrument, markets expected this scenario with a probability of 60.0%, and now it is about 30.0%.

Support and resistance

On the daily chart, the trading instrument is correcting, approaching the support line of the ascending channel 1.3450–1.3050.

Technical indicators are weakening the buy signal: fast EMAs on the Alligator indicator are approaching the signal line again, and the AO histogram is forming correction bars, falling in the sell zone.

Resistance levels: 1.3180, 1.3420.

Support levels: 1.3070, 1.2860.

Trading tips

Short positions may be opened after the price declines and consolidates below 1.3070, with the target at 1.2860. Stop loss — 1.3130. Implementation period: 7 days or more.

Long positions may be opened after the price grows and consolidates above 1.3180, with the target at 1.3420. Stop loss — 1.3100.