GBP/USD Forex Technical Analysis – Big Challenge for Buyers at 1.1321 to 1.1550

The British Pound posted a steep gain against the U.S. Dollar on Thursday after reports of a possible U-turn by the U.K. government on its fiscal plans. Meanwhile, investors shrugged off hotter-than-expected U.S. consumer inflation news and the prospect of more aggressive rate hikes by the Federal Reserve, choosing instead to focus on more important domestic issues.

On Thursday, the GBP/USD settled at 1.1332, up 0.0233 or +2.06%. The Invesco CurrencyShares British Pound Sterling Trust ETF (FXB) finished at $108.66, up $1.97 or +1.85%.

The Sterling went on a strong intraday run after Sky News reported on Thursday that the British government is discussing making changes to the fiscal plan announced last month and looking at which parts of the tax-cutting package might be ditched in a further U-turn by Prime Minister Liz Truss.

British finance minister Kwasi Kwarteng said “let’s see”, when asked in an interview if financial markets had improved on Thursday because of expectations of a U-turn on his plans to scrap an increase in corporation tax, the Telegraph reported.

In the U.S. on Thursday, data showed U.S. consumer prices increased more than expected in September and underlying inflation pressures continue to escalate, cementing expectations the Federal Reserve will deliver another 75-basis point (bps) rate increase at next month’s policy meeting.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum is trending higher.

A trade through 1.1494 will change the main trend to up. A move through 1.0924 will signal a resumption of the downtrend.

The minor trend is also up. It changed to up on Thursday when buyers took out the previous minor top at 1.1180.

The main range is 1.2293 to 1.0349. Its retracement zone at 1.1321 to 1.1550 is resistance. It stopped a recent rally on October 5 at 1.1494.

The short-term range is 1.0349 to 1.1494. Its retracement zone at 1.0922 to 1.0786 is support. This week’s low is 1.0924. This shows that traders respected the support area.

Daily Swing Chart Technical Forecast

Trader reaction to the main 50% level at 1.1321 is likely to determine the direction of the GBP/USD early Friday.

Bullish Scenario

A sustained move over 1.1321 will indicate the presence of buyers. Taking out yesterday’s high at 1.1380 will indicate the buying is getting stronger. If this creates enough upside momentum then look for a surge into the last main top at 1.1494, followed by the main Fibonacci level at 1.1550.

Taking out the main top at 1.1494 will change the trend to up, while the Fib level at 1.1550 is a potential trigger point for an acceleration to the upside.

Bearish Scenario

A sustained move under 1.1321 will signal the return of sellers. If this move generates enough downside momentum then look for a retest of the support cluster at 1.0924 – 1.0922.