GBP/USD and a Return to $1.15 in the Hands of Chancellor Jeremy Hunt

It was a quiet start to the week for the GBP/USD. From the economic calendar, there were no economic indicators to influence the Pound. The lack of stats leaves the GBP/USD in the hands of the Bank of England, updates from the new Chancellor, and news from the UK Parliament.

On Friday, the GBP/USD tumbled by 1.22% to $1.11770. The markets reacted adversely to the news of Chancellor Kwarteng’s resignation and the Bank of England’s decision to proceed with ending the emergency gilt purchase operations.

With Liz Truss deciding to oust her Chancellor and staunch supporter to save her post, more activity is likely. However, the bigger question will be whether Truss can remain at number 10.

Chancellor Jeremy Hunt needs to deliver a strong message today to restore confidence. However, Hunt may be in no position to save the PM. The British Prime Minister could face a no-confidence vote.

While UK politics will take center stage, Bank of England chatter will draw plenty of interest. Market turmoil could continue until the government and the BoE restores confidence.

There are no Monetary Policy Committee members due to speak today, according to the BoE calendar. Unscheduled speeches with the media will need monitoring. Over the weekend, Bank of England Governor Andrew Bailey warned that the Bank could lift interest rates higher than previously anticipated.

The comments followed his first conversation with new Chancellor Jeremy Hunt and supported the bullish start to the day.

GBP/USD Price Action

At the time of writing, the Pound was up 0.89% to $1.12763. A bullish start to the day saw the GBP/USD rally from an early low of $1.12080 to a high of $1.13048 before easing back.

Technical Indicators

The Pound needs to avoid the $1.1232 pivot to retarget the First Major Resistance Level (R1) at $1.311. However, the lack of UK stats leaves the Pound in the hands of the BoE and government chatter.

In the case of another extended rally, the GBP/USD would likely test the Second Major Resistance Level (R2) at $1.1446 and resistance at $1.15. The Third Major Resistance Level (R3) sits at $1.1660.

A fall through the pivot would bring the First Major Support Level (S1) at $1.1097 into play. However, barring another extended sell-off, the Pound would likely avoid sub-$1.10. The Second Major Support Level (S2) at $1.1018 should limit the downside.

The Third Major Support Level (S3) sits at $1.0803.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The GBP/USD sits above the 100-day EMA, currently at $1.11878. The 50-day EMA closed in on the 100-day EMA, with the 100-day EMA narrowing to the 200-day EMA, delivering bullish signals.

A GBP/USD move through R1 ($1.1311) and the 200-day EMA ($1.13166) would support a breakout session. However, a fall through the 100-day EMA (1.11878) and the 50-day EMA ($1.11685) would bring S1 ($1.1097) into play.

The US Session

It is a quiet day ahead on the US economic calendar, with NY Empire State Manufacturing numbers in focus. However, barring dire numbers, the stats are unlikely to shift market sentiment towards the Fed’s policy goals.

FOMC member chatter will also need monitoring as market bets of 75-basis point rate hikes in November and December rise.