GBP/USD Faces the Risk of Sub-$1.11 as Liz Truss Battles for Survival

It is a quiet day for the GBP/USD. From the economic calendar, there are no UK stats to provide the Pound with direction.

The lack of stats leaves the Pound at the mercy of the UK government and the Bank of England. While Chancellor Jeremy Hunt aims to restore confidence, British PM Liz Truss has more fires to tackle. The in-Party rebellion continues, with members of her cabinet resigning in protest.

Monetary policy also remains a central theme. September inflation numbers support a hawkish policy move next month while delivering more economic uncertainty. Chancellor Hunt will be tightening the purse strings that may also influence the Bank of England’s plans to tackle inflation.

With the Bank of England under scrutiny, Monetary Policy Committee member speeches remain an area of market interest. MPC member Ben Broadbent speaks at Imperial College today on ‘The Inflationary Consequences of Real Shocks.’

GBP/USD Price Action

At the time of writing, the Pound was down 0.07% to $1.12082. A mixed start to the day saw the GBP/USD rise to an early high of $1.12232 before falling to a low of $1.12007.

Technical Indicators

The Pound needs to move through the $1.1254 pivot to target the First Major Resistance Level (R1) at $1.1324 and the Wednesday high of $1.13579. However, following Wednesday’s pullback, the GBP/USD would need a pickup in risk appetite and hawkish MPC member chatter to support a breakout session.

In the case of another extended rally, the GBP/USD would likely test the Second Major Resistance Level (R2) at $1.1428 and resistance at $1.1450. The Third Major Resistance Level (R3) sits at $1.1601.

Failure to move through the pivot would leave the First Major Support Level (S1) at $1.1151 in play. However, barring another extended sell-off, the Pound would likely avoid sub-$1.11 and the Second Major Support Level (S2) at $1.1081.

The Third Major Support Level (S3) sits at $1.0908.

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 $1.12181.

The 50-day EMA closed in on the 100-day EMA, with the 100-day EMA easing back from the 200-day EMA, delivering bearish signals.

A GBP/USD move through the 100-day EMA ($1.12181) and the 50-day EMA ($1.12276) would support a run at R1 ($1.1324). However, failure to move through the 100-day EMA would leave S1 ($1.1151) in play.

The US Session

It is a busier day ahead on the US economic calendar, with Philly Fed Manufacturing and weekly jobless claims in the spotlight. Following a lack of stats on Wednesday, the markets will look for cracks in the US economy.

While the headline Philly Fed number will influence, we expect sub-components to draw plenty of interest. Employment, prices paid, and new orders will likely be areas of interest. Initial jobless claims will also need consideration. Labor market conditions form part of the list of factors on how aggressively the Fed can bring inflation to target.

FOMC member commentary will also need monitoring, with Harker and Bowmen speaking later today.