Cable is consolidating within a narrow range, following Wednesday’s 1.6% drop, which retraced over 50% of the recent 1.1146/1.1599 upleg.

Although a reversal pattern formed on a daily chart, fresh bears face strong headwinds from significant support at 1.1319 (top of thick daily cloud / Fibo 61.8%) which so far keeps the downside protected and prevent confirmation of reversal.

Daily studies are currently mixed, but expected to remain slightly biased higher while the action stays above the cloud, though lift and close above 10DMA (1.1427) is needed to revive bulls and extension above psychological 1.15 level to confirm.

Conversely, penetration of daily cloud and extension through daily Kijun-sen (1.1284) would add to bearish stance and risk deeper fall.

Traders look for US inflation data to get clearer signals, with October’s figure at / below forecast (8%) to deflate dollar and give fresh boost to sterling, while higher than expected result would add to the story of Fed’s continuous aggressive policy tightening, which is expected to be dollar supportive.

GBPUSD broke below the 100-period Simple Moving Average (SMA) on the four-hour chart on Wednesday and closed the last five four-hour candles below that level. Meanwhile, the Relative Strength ındex (RSI) indicator on the same chart retreated below 50, confirming the bearish tilt in the short-term technical outlook.

On the downside, 1.1340 (static level) aligns as initial support before 1.1300 (psychological level) and 1.1280 (200-period SMA).

It, however, remains to be seen if bulls are able to capitalize on the move amid a bleak outlook for the UK economy, which might continue to act as a headwind for the British Pound. Hence, the focus now shifts to the Priliminary UK Q3 GDP report, due on Friday. The key UK macro data should provide a fresh directional impetus to the GBPUSD pair.

GBPUSD is about to complete its 5 wave correction

Nov 10 2022