GBP/USD Trends Lower Amid Strong Dollar and BoE Rate Speculation

EURUSD

Outlook: Potential for Decline

Fundamental Analysis

The EUR/USD pair holds steady around 1.0790 in early Monday trading after last week's losses. The pair faces downward pressure due to a strengthening U.S. Dollar, influenced by robust U.S. economic data that could prompt the Federal Reserve to maintain a less dovish stance in November.

On Friday, the University of Michigan's Consumer Sentiment Index rose to 70.5 for October, surpassing both the previous reading of 68.9 and the forecasted 69.0. Additionally, Durable Goods Orders dipped by 0.8% in September, slightly less than the anticipated 1.0% decline.

Safe-haven demand for the Dollar has also grown amid Middle East tensions and uncertainty around the approaching U.S. presidential election. Adding to this, European Central Bank official Klaas Knot's recent comments emphasized the ECB’s flexibility to adapt based on economic risks to growth and inflation.

Technical Analysis

EUR/USD recently moved above its descending regression channel, consolidating beyond its upper limit. On the 4-hour chart, the Relative Strength Index (RSI) climbed past 50 for the first time in weeks, signaling a potential bullish trend.

Immediate resistance lies at the 50-period Simple Moving Average (SMA) of 1.0835, with the 200-day SMA at 1.0870. A sustained break above these levels could encourage buyers, potentially lifting the pair toward 1.0930, where the 100-day SMA provides another barrier.

On the downside, support levels are at 1.0800, followed by 1.0760 and 1.0700.

XAUUSD

Prediction: Potential Increase

Fundamental Analysis:

Gold prices are currently hovering around $2,730, showing resilience after a two-day downtrend during early Monday trading in the Asian session. Although recent declines reflect some selling pressure, the downside appears limited due to persisting geopolitical tensions and the upcoming U.S. presidential election. On Friday, a surge in demand for the U.S. Dollar, spurred by expectations of a less aggressive monetary easing approach from the Federal Reserve, weighed on gold prices. Additionally, a generally upbeat sentiment in equity markets has temporarily curbed gold’s appeal as a safe-haven asset.

Despite this, ongoing uncertainties surrounding the November 5 election, escalating Middle East conflicts, and decreasing U.S. Treasury yields are likely to support gold prices, warranting caution before anticipating a significant downturn.

Technical Analysis:

Technically, short-term charts indicate a bearish head and shoulders formation, with critical neckline support at approximately $2,705. Should the selling pressure persist and prices dip below $2,700, it could lead to further declines toward $2,675 and possibly as low as $2,660.

Conversely, a move above the $2,640-$2,645 resistance area would invalidate this bearish pattern, opening the door for gold to challenge the recent peak near $2,658-$2,659. Sustained upward momentum could propel XAU/USD toward the four-month trend-line resistance around $2,770, with a potential further rise to the $2,800 level.

GBPUSD

Prediction: Bearish

Fundamental Analysis:

GBP/USD is showing a downward trend early in the week, influenced by widespread strength in the USD. The Dollar is buoyed by the possibility of the Federal Reserve maintaining a steady approach, while speculation about potential rate cuts from the Bank of England adds pressure to the Pound. Following a sharp drop on Wednesday, GBP/USD regained over 0.4% on Thursday, but remained in a narrow range below the 1.3000 mark on Friday morning.

The Dollar eased slightly on Thursday, with the Dollar Index dipping 0.4% due to improved risk sentiment and declining U.S. Treasury yields. Friday’s U.S. economic calendar features Durable Goods Orders and the University of Michigan Consumer Sentiment Index. The revised UoM data is expected to have limited impact, but stronger-than-expected Durable Goods Orders could support the Dollar, while weaker results might give GBP/USD a chance to rise. Additionally, an anticipated positive open on Wall Street could draw risk-seeking investors, potentially weakening the Dollar later in the day.

Technical Analysis:

GBP/USD is trading in the upper region of a descending regression channel and remains above the 100-day Simple Moving Average (SMA) at 1.2970. The 4-hour Relative Strength Index (RSI) is slightly above 50, indicating limited seller momentum. Holding above the 1.2970 support level may keep buyers engaged, with immediate resistance anticipated around 1.3000-1.3010, followed by 1.3050 and 1.3100. On the downside, support levels are seen at 1.2900 and 1.2800.

USDJPY

Forecast: Potential Upside Likely

Fundamental Analysis: 

The Japanese Yen is facing difficulty sustaining its recovery from recent lows, largely due to ongoing uncertainty surrounding the Bank of Japan's policy stance. Tokyo's latest mixed consumer inflation figures, along with positive global risk sentiment, are weighing on the Yen, which typically benefits from risk-off flows. Meanwhile, demand for the U.S. Dollar remains strong, backed by expectations that the Federal Reserve will maintain a more moderate approach to rate easing.

The Yen’s recent gains against the Dollar have been capped, with the pair trading around 153.20—a level last seen in July. Data highlighting contractions in Japan’s manufacturing and services sectors, coupled with core inflation in Tokyo slipping below the BoJ's 2% target, have reduced expectations for any rate hikes in 2024. Political uncertainty surrounding Japan's general election, combined with a stable risk-on market mood, is adding further pressure on the Yen. Dip-buying in the Dollar has driven USD/JPY toward 152.00 as the European session unfolds, though recent comments from Japanese officials have limited the Yen’s downside.

Technical Analysis: 

Technically, if USD/JPY falls below the 151.60-151.55 support area, it could slide further to 151.00. Additional declines could test support near 150.65, a level that aligns with the 200-day Simple Moving Average and the 50% Fibonacci retracement of the July-September downtrend. A decisive break below this area would signal that the recent rally has weakened, opening the door for a bearish outlook.

On the upside, a move above 152.00 could pave the way to the 152.60-152.65 zone. Continued buying pressure might allow USD/JPY to retest the 153.00 level, with the 61.8% Fibonacci retracement around 153.20 as the next resistance. Clearing this could encourage further gains toward 154.00 and potentially up to the 154.30 region.

 

 

 

 

 

 

 

 

 

 

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