GBPUSD in Focus Amid Key Economic Events and Trump's Election

Andreas Thalassinos
Andreas Thalassinos

07.11.2024

This week's economic highlights include interest rate decisions from the Bank of England and the Federal Reserve, along with US unemployment claims and Canada's employment change report.  The GBPUSD pair, trending downward since its September peak, shows bearish technical indicators, including a "Death Cross" and weakened Momentum and RSI values, suggesting further downside risk.  Potential resistance levels are identified at 1.30466 and 1.34337, while support levels range from 1.28337 to 1.25144.  

Overview

This week's economic highlights include interest rate decisions from the Bank of England and the Federal Reserve, along with US unemployment claims and Canada's employment change report. The GBPUSD pair, trending downward since its September peak, shows bearish technical indicators, including a "Death Cross" and weakened Momentum and RSI values, suggesting further downside risk. Potential resistance levels are identified at 1.30466 and 1.34337, while support levels range from 1.28337 to 1.25144. The Bank of England is anticipated to lower its base rate by 0.25 percentage points, responding to easing inflation. However, fiscal pressures from the recent UK budget and potential inflation from US trade policies could temper the pace of future rate cuts.

Key Economic Events

Thursday 14:00 (GMT+2) - UK: Official Bank Rate (GBP)

Thursday 15:30 (GMT+2) - USA: Unemployment Claims (USD)

Thursday 21:00 (GMT+2) - USA: Federal Funds Rate (USD)

Friday 15:30 (GMT+2) - Canada: Employment Change (CAD)

Technical Analysis

Since peaking at 1.34337 on September 26, the GBPUSD pair has fallen below its 50-period Exponential Moving Average (EMA), with the downward trend reinforced by bearish signals from both the Momentum oscillator and the Relative Strength Index (RSI). Additionally, the formation of a "Death Cross" – a double-crossover reversal pattern – has further amplified selling pressure.  Currently, the Momentum oscillator remains below the 100 baseline, while the RSI sits under 50, both indicating continued downside potential in the near term.

Potential Upside Targets  

Should the bulls take market control, traders may direct their attention toward the four potential resistance levels below:

1.30466: The initial resistance is 1.30466, which aligns with the swing high reached on November 5.

1.31337: The second price target is identified at 1.31337, corresponding to the weekly resistance, R2, calculated using the standard Pivot Points methodology.

1.32045: The third target is established at 1.32045, aligning with the 61.8% Fibonacci Retracement drawn from the swing high 1.34337 to the swing low 1.28337.

1.34337: An additional price target is estimated at 1.34337, which corresponds to the daily high that was reached on September 26.

Potential Downside Targets  

Should the sellers maintain market control, traders may consider the four potential support levels listed below:

1.28337: The first level of support is identified at 1.28337, representing the daily low marked on November 6.

1.27358: The second support level is 1.27358, reflecting the weekly support, S2, calculated using the standard Pivot Points methodology.

1.26648: The third support level is identified at 1.26648, corresponding to a weekly low.

1.25144: An additional downward target is observed at 1.25144, corresponding to the 261.8% Fibonacci Extension drawn from the swing low 1.28337 to the swing high 1.30466.

Fundamentals

The Bank of England is expected to cut its base interest rate by 0.25 percentage points this Thursday, potentially lowering it to 4.75%. Following a previous cut in August, this reduction aligns with recent data showing a slowdown in inflation, with the UK's Consumer Prices Index (CPI) dropping to 1.7%, well below the Bank's 2% target. However, factors like the recent UK budget, which includes increased taxes and spending, as well as inflationary pressures from Donald Trump's trade policies, may influence the Bank's caution on further cuts. Economists now anticipate a slower pace of rate reductions as inflationary pressures persist.

Conclusion

In conclusion, this week's key economic events and technical indicators point to a cautious outlook for GBPUSD, with the pair showing strong bearish momentum. Anticipated interest rate cuts from the Bank of England and the Federal Reserve are likely to influence markets, though external factors, such as fiscal pressures from the UK budget and potential inflation from US trade policies, may slow the pace of future rate reductions. Traders should closely monitor support and resistance levels as well as economic data releases, as these will play a critical role in shaping market sentiment in the near term.

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Andreas Thalassinos
Andreas Thalassinos

Andreas Thalassinos is a recognized authority in the financial markets and world renowned for his expertise in algorithmic trading. He is a Certified Technical Analyst and highly respected lecturer in the education of traders, investors, and financial markets professionals. Thalassinos has played a key role in the development of education within the industry, training tens of thousands of traders of all skill levels. Traders value his seminars and workshops for the rich content, his passionate, charismatic, and lively presentations.