GBP/USD and a Return to $1.14 Remains Autumn Budget Dependent

It is a quiet day for the GBP/USD. According to the economic calendar, house price numbers for October are due. A sharp slowdown in house price growth could test buyer demand for the Pound.

On Thursday, the bank of England warned of a lengthy recession. A deterioration in housing sector conditions would sound more alarm bells.

With the stats on the lighter side, the UK Government and the Bank of England will remain in the spotlight. While no BoE Monetary Policy Committee members speak today, comments to the media will need consideration. Investors will also need to track chatter from the UK Government, with PM Sunak under pressure after a series of missteps.

Over the weekend, news hit the wires of Chancellor Jeremy Hunt’s plans to cut spending by £35 billion and raise tax revenues by £25 billion. Ministers will submit the key points of the Autumn budget to the Office for Budget Responsibility (OBR) by this morning. Credibility will remain a keyword.

GBP/USD Price Action

At the time of writing, the Pound was down 0.37% to $1.13307. A mixed start to the day saw the GBP/USD fall to an early low of $1.12997 before finding support.

Technical Indicators

The Pound needs to avoid a fall through the $1.1299 pivot to target the First Major Resistance Level (R1) at $1.1456. Market risk sentiment needs to be bullish to support a GBP/USD return to $1.14.

In the case of a Government-fueled extended rally, the GBP/USD would likely test resistance at $1.15 and the Second Major Resistance Level (R2) at $1.1538. The Third Major Resistance Level (R3) sits at $1.1778.

A fall through the pivot would bring the First Major Support Level (S1) at $1.1216 into play. However, barring a risk-off-fueled sell-off, the Pound would likely avoid sub-$1.11 and the Second Major Support Level (S2) at $1.1059.

The Third Major Support Level (S3) sits at $1.0820.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bearish signal. The GBP/USD sits below the 100-day EMA, currently at $1.13617. The 50-day EMA narrowed to the 200-day EMA, with the 100-day EMA crossing through the 200-day EMA, delivering bearish signals.

A GBP/USD move through 100-day and 200-day EMAs would support a break out from the 50-day EMA ($1.3812) to bring R1 ($1.1456) into play. However, a failure to move through the 100-day ($1.13617) and 200-day ($1.13625) EMAs would bring S1 ($1.1216) into view.

The US Session

It is a quiet day ahead on the US economic calendar.

Following Friday’s jobs report, no economic indicators are due, leaving the markets to respond further to the stats.

While there are no stats, FOMC member chatter needs consideration. Members Mester and Collins speak late in the US session. With the markets holding onto hopes of a Fed pivot, hawkish commentary would test GBP/USD appetite.