Current trend

The GBP/USD pair is correcting to a medium-term downward trend, testing the level of 1.2695 (Murrey level [0/8]) with the support of October UK macroeconomic data.

The Bank of England’s key indicator of service sector prices accelerated from 4.9% to 5.0% YOY, the consumer price index – from 1.7% to 2.3% YoY, exceeding the forecast of 2.2%, and the core indicator – from 3.2% to 3.3% YoY instead of 3.1%, exceeding the target of 2.0%. The pressure on the economy could increase due to tax increases in the new budget presented by the Labor government. Thus, yesterday, the head of the regulator, Andrew Bailey, said that due to the growth in contributions to the National Insurance system, businesses could pass on these costs to consumers. In this environment, the financial authorities’ refusal to adjust the interest rate in December and a slower pace of easing next year became more likely, strengthening the pound against its main rivals.

However, the upward dynamics are limited since the US Fed official may also adopt a wait-and-see attitude pending the actions of the new Donald Trump administration, leading to a resumption of growth in consumer prices and, as a result, a pause in interest rate adjustments. Nevertheless, maintaining the “dovish” rhetoric at the December meeting and reducing the cost of borrowing next year to 3.75% from 3.00%, as previously expected, seems possible.

Support and resistance

The trading instrument is testing 1.2695 (Murrey level [0/8]). Consolidation above will lead to a correction to the 1.2817 area (Murrey level [1/8]). Then, a decline to the 1.2451 area (Murrey level [–2/8]) and 1.2207 (Murrey level [2/8], W1) may follow.

Technical indicators confirm the continuation of the downward trend: Bollinger bands are reversing downwards, and the MACD histogram is increasing in the negative zone.

Resistance levels: 1.2695, 1.2817.

Support levels: 1.2451, 1.2207.

Trading tips

Short positions may be opened from 1.2625 or when the price reverses around ​​1.2817, with the targets of 1.2451, 1.2207, and stop losses ​​1.2745 and 1.2980, respectively. Implementation period: 5–7 days.