Highest since 1990 – US inflation has hit 6.2%, reaching not only a historic peak but also sending the dollar substantially higher. The mix of Brexit acrimony and disappointing UK growth figures contributed to a downfall for GBP/USD. What's next? Critical data for the subsequent rate decisions stand out in the upcoming week. Prices of cars, shelter and almost all products and services jumped in October, pushing not only the headline Consumer Price Index to 31-year highs but also Core CPI to 4.6%, smashing all economists' expectations. After a hesitant initial reaction, markets moved more aggressively to price quicker rate hikes from the Federal Reserve. The dollar jumped across the board. How is the labor market doing after the furlough scheme? Tuesday's employment data for September is set to provide some answers. Economists expect an unemployment rate of 4.5%, a repeat of the figure in August, and moderation in wages, including bonuses, from 7.2% to 7% YoY. The BOE is watching both figures ahead of its December rate decision.

BULLISH AND BEARISH CONDITIONS/ POSSIBILITIES : (TECHNICALS)

Pound/dollar has hit the lowest levels in over ten months, and momentum is clearly to the downside. The 50-day, 100-day and 200-day Simple Moving Averages (SMAs) lean lower and loom above the currency pair. Is sterling oversold? Not yet, at least according to the daily chart. The Relative Strength Index (RSI) is still above 30, thus outside the oversold territory.

Immediate support awaits at the fresh 2021 trough of 1.3350. It is followed by 1.3310, a swing high from late last year. The following levels to watch are 1.3190 and 1.3170.

The broken 1.34 support level remains a battle line. The next significant level to watch is only 1.3550, which worked in both directions in recent months. It is followed by 1.36, which capped a recovery attempt in early November, and then by 1.3710 and 1.3830.

GBPUSD likely to initiate a hawkish correction

Nov 13 2021