GBP/USD Softens as Markets Await Key Economic Releases and UK Autumn Budget

EURUSD

Prediction: Likely Decrease

Fundamental Analysis:

The EUR/USD pair has edged up to around 1.0820 in early Asian trading on Wednesday, though its potential for further gains appears capped amid uncertainty surrounding the U.S. presidential election and key economic reports ahead. On Tuesday, it struggled to sustain Monday’s rebound, hovering around 1.0800 after hitting a low near 1.0770 earlier in the week. The pair remains below its 200-day Simple Moving Average (SMA) of 1.0868, indicating a bearish outlook may continue.

Despite a recent rally, the U.S. Dollar's momentum appears to be waning as the Dollar Index climbs past 104.60. Expectations of a possible 25-basis-point rate cut by the Federal Reserve next month add to the uncertainty, although some officials have expressed reservations. In Europe, the ECB remains vigilant and data-driven after its recent rate cuts, emphasizing careful monitoring of economic indicators. Key releases, including U.S. Q3 GDP growth and Germany’s latest inflation figures, could play a pivotal role in shaping market sentiment.

Technical Analysis:

Should the EUR/USD continue to decline, it may revisit its October low of 1.0760, potentially testing the 1.0700 psychological level, followed by the June low of 1.0666. Immediate resistance lies at the 200-day SMA at 1.0868, with additional resistance at the 100-day and 55-day SMAs, positioned at 1.0933 and 1.1023, respectively. Further upside resistance could be seen at the 2024 peak of 1.1214 and the 2023 high of 1.1275.

The outlook remains bearish while the EUR/USD is trading below the 200-day SMA. On the four-hour chart, the pair appears range-bound, with key support at 1.0760 and resistance at 1.0839. The Relative Strength Index (RSI) is approaching the neutral 50 level, indicating a potential for movement in either direction.

XAUUSD

Prediction: Expected Increase

Fundamental Analysis:

Gold prices surged to a new high in Wednesday's Asian session, underpinned by robust safe-haven demand stemming from ongoing geopolitical tensions in the Middle East and election-related uncertainty in the U.S. The recent dip in the U.S. Dollar from a three-month peak and declining U.S. Treasury yields further supported XAU/USD. Spot Gold climbed past $2,770 as investors sought stability amid key upcoming economic reports and the impending elections.

This momentum gained traction following U.S. data releases, notably the Conference Board’s Consumer Confidence Index, which rose to 108.7 in October from 99.2 in September. Meanwhile, a report on job openings showed a decrease to 7.44 million, pointing to a potential easing in the labor market, which may reduce wage inflation pressures—a development welcomed by the Federal Reserve. Caution persists as investors await Thursday’s preliminary Q3 GDP estimate and Friday’s Nonfarm Payrolls report. Additionally, the U.S. will release the Personal Consumption Expenditure (PCE) Price Index, a key inflation indicator that could influence the Fed's upcoming policy meeting on November 7, just following the presidential election.

Technical Analysis:

After reaching recent highs, XAU/USD has seen a slight retreat, though it retains most of its intraday gains, hovering near $2,766. On the daily chart, indicators point to a continuation of the upward trend, with the 20-day Simple Moving Average (SMA) on the rise around $2,685 and other longer-term SMAs positioned over $300 lower, affirming a bullish outlook. In the 4-hour chart, momentum indicators remain positive and suggest additional upward potential, approaching but not yet overbought. The 20 SMA is providing dynamic support near $2,740.60, with the 100 and 200 SMAs firmly bullish and well below the current trading level.

GBPUSD

Prediction: Expected Decline

Fundamental Analysis:

The GBP/USD pair is softening around 1.3010 as the U.S. Dollar stabilizes early in the European session on Wednesday. Market participants are closely watching upcoming events, including the UK’s Autumn Budget, the U.S. October ADP Employment Change, and preliminary Q3 GDP data, all set for release later today.

Earlier in the week, GBP/USD traded within a narrow range, ultimately closing near its opening level as it continued to consolidate above 1.2950. While the U.S. Dollar displayed modest strength on Monday, GBP/USD managed to contain its losses due to a slight uptick in risk sentiment.

Later today, investors will scrutinize the JOLTS Job Openings, projected to fall to 7.99 million from 8.04 million in August. An unexpected result could sway the Dollar, leading to potential volatility in GBP/USD. British Prime Minister Keir Starmer emphasized tough fiscal choices in the upcoming budget, hinting at potential tax hikes while stressing the need for long-term investments in the UK’s future.

Technical Analysis:

Currently trading within a descending regression channel initiated in late September, GBP/USD displays a neutral Relative Strength Index (RSI) around 50 on the 4-hour chart, signaling a lack of clear momentum. The 100-day Simple Moving Average at 1.2970 remains a critical level; a close above it could draw technical buying interest, with potential moves toward 1.3010 and 1.3060.

On the downside, initial support is seen between 1.2900 and 1.2890, with further support around 1.2800.

USDJPY

Prediction: Increase

Fundamental Analysis:

USD/JPY is consolidating near a three-month peak as traders await critical announcements from the Bank of Japan (BoJ) and upcoming U.S. economic data. The Bank of Japan's potential inability to further raise interest rates, combined with positive market sentiment, could keep the Yen under pressure. The strong U.S. economic performance, particularly as other major economies show signs of slowing, supports expectations that the Federal Reserve's rate adjustments will be cautious, thus maintaining support for U.S. Treasury yields and the Dollar.

Political uncertainty in Japan, particularly following recent elections, also weighs on the Yen. It’s anticipated that the BoJ will likely hold rates steady until the political climate becomes clearer. In the U.S., consumer confidence for October is projected to rise, while JOLTS Job Openings are expected to slightly decrease, though they should remain at robust levels.

Technical Analysis:

Technically, the USD/JPY’s bullish trend persists, though a potential correction may be on the horizon as the RSI signals a bearish divergence. Key resistance levels are at 153.90 and 155.10, with support expected at 152.50 and 151.60.

 

 

 

 

 

 

 

 

 

 

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