GBP/USD Faces the Risk of Sub-$1.13 as the BoE Takes the Stage

It is a big day for the GBP/USD. According to the economic calendar, finalized UK manufacturing PMI numbers for October are due. However, unless there is a sizeable revision from prelim figures, the PMI is unlikely to impact the Pound.

The Bank of England is in the spotlight, which delivers its monetary policy decision today. The markets expect the BoE to hike interest rates by 75 basis points to 3%. However, economic conditions and the UK government’s plans to balance the books have raised the bets for a dovish move that could weigh on the Pound.

A dovish rate hike would continue tilting the scales in favor of the Greenback.

While the monetary policy decision and minutes will influence the Pound, BoE Governor Bailey will have the final say. The Bank of England’s economic outlook and monetary policy plans will also impact the Pound.

Monetary Policy Committee member Catherin Mann will also speak later in the day.

GBP/USD Price Action

At the time of writing, the Pound was up 0.18% to $1.14095. A mixed morning saw the GBP/USD fall to an early low of $1.13747 before rising to a high of $1.14220.

Technical Indicators

The Pound needs to move through the $1.1447 pivot to target the First Major Resistance Level (R1) at $1.1508 and the Wednesday high of $1.1565. A hawkish BoE rate hike would support a return to $1.15.

In the case of a BoE-fueled extended rally, the GBP/USD would likely test the Second Major Resistance Level (R2) at $1.1626. The Third Major Resistance Level (R3) sits at $1.1805.

Failure to move through the pivot would leave the First Major Support Level (S1) at $1.1329 in play. However, barring another sell-off, the Pound would likely avoid sub-$1.1250. The Second Major Support Level (S2) at $1.1268 should limit the downside.

The Third Major Support Level (S3) sits at $1.1089.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bearish signal. The GBP/USD sits below the 50-day EMA, currently at $1.14558. The 50-day EMA narrowed to the 200-day EMA, with the 100-day EMA closing in on the 200-day EMA, delivering bearish signals.

A bearish cross of the 100-day EMA through the 200-day EMA would bring sub-$1.13 support levels into play. However, a breakout from the 50-day EMA ($1.14558) would give the bulls a run at R1 ($1.1508).

The US Session

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

Factory orders, weekly jobless claims, and the ISM Non-Manufacturing PMI number are due. Unless there is a sharp increase in jobless claims, the ISM numbers will draw the most interest.

While the headline figure will be the key, we expect the markets to consider employment, new orders, and price sub-components. A rise in the ISM Non-Manufacturing Employment and Price Index would tip the scales in favor of a 75-basis point December rate hike.

No FOMC members will speak to guide the markets following today’s stats, leaving Fed Chair Powell’s press conference to resonate. The FOMC blackout period started on October 22 and ends today.

Going into the Thursday session, the FedWatch Tool had the probability of a December rate hike at 38.5%. One week ago, the likelihood of a 75-basis point hike in December stood at 34.1%.