GBP/USD at Threat of Freefall if 1.2000 Psychological Stage is Damaged

GBP, DXY PRICE, CHARTS AND ANALYSIS:

Learn Extra: US Greenback Index (DXY) Replace: US Greenback Retreats with GBP/USD Eyeing a Trendline Break

GBPUSD loved a combined day with some consolidation within the European session because the DXY began the day on the again foot. The US session nonetheless, has seen an increase in US Yields which has underpinned the US Greenback and reignited the bullish rally within the Greenback Index. The Query is how excessive can the Greenback Index (DXY) Go?

DOLLAR INDEX (DXY) AND US Q3 GDP

As talked about earlier this week the DXY is unlikely to come back beneath sustained promoting strain in the intervening time given the trajectory of US Yields and ongoing Geopolitical tensions. This help signifies that any dips at current are more likely to current brief time period USD shopping for alternatives as danger sentiment continues to shift between risk-on and risk-off.

Wanting on the technical at play within the DXY and yesterday’s bullish engulfing candle shut and todays bullish US session there are indicators of a return to the important thing 106.80-107.20 resistance space. I do assume the DXY will wrestle at resistance right here and is in want of a catalyst if we’re to interrupt increased. US Q3 GDP lies forward tomorrow and even a print above expectation might not be sufficient for sustained break above resistance. Expectations are for the US economic system to point out development of 4.3% for the quarter, properly above the two.1% in Q2. As we method subsequent week’s Federal Reserve, and the general market temper I count on market contributors to stay cautious.

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Greenback Index (DXY) Day by day Chart

Supply: TradingView, Chart Created by Zain Vawda

GBP FUNDAMENTALS

Cable has failed to seek out help in UK knowledge this week and the potential for additional weak spot stays a risk. Information this week has confirmed labor knowledge remained fairly constructive however feedback from the BoE Governor and policymakers recommend the Financial institution of England are achieved with price hikes in 2023. This assumption appears to be a drag on GBP at current leaving GBPUSD weak to a break of the 1.2000 psychological degree.

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TECHNICAL OUTLOOK AND FINAL THOUGHTS

GBPUSD is again at latest lows and a key help space which if damaged may push Cable towards the 1.2000 psychological mark. A break of 1.2000 may depart GBPUSD in freefall significantly if the Fundamentals line up as properly.

Cable noticed a trendline rejection yesterday and a marubozu candle shut which hinted at additional draw back right now. Nevertheless, some early USD weak spot within the European session stored the slide at bay till the latter a part of the US session. A day by day candle shut beneath the 1.2080 deal with may nonetheless show elusive as Central Financial institution conferences come into focus and will see GBPUSD rangebound between the 1.2080 and 1,2280 handles.

Alternatively, we should keep in mind the US greenback and is protected haven attraction which may enhance on Geopolitical issues and that would additionally depart cable weak for an accelerated temper to the draw back with no different knowledge for the British Pound to depend on for the remainder of the week (not that it helped a lot this week anyway).

Key Ranges to Hold an Eye On:

Help ranges:

• 1.2080
• 1.2030
• 1.2000 (Psychological Stage)
• 1.1850

Resistance ranges:

GBP/USD Day by day Chart, October 25, 2023

Supply: TradingView, Chart by Zain Vawda

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— Written by Zain Vawda for DailyFX.com

Contact and comply with Zain on Twitter: @zvawda