GBPUSD Technical Analysis – Is this a correction or a reversal?

<p>US:</p><ul><li>The Fed <a href="https://www.forexlive.com/centralbank/the-fomc-keeps-the-target-fed-funds-range-at-525-to-550-20230920/">left interest rates unchanged</a> as expected at the last meeting.</li><li>The macroeconomic projections were revised higher,
and the Dot Plot showed that the FOMC still expects another rate hike by the
end of the year with less rate cuts projected in 2024.</li><li><a href="https://www.forexlive.com/centralbank/highlights-from-the-fed-chair-powells-press-conference-after-september-rate-decision-20230920/">Fed Chair Powell</a> reaffirmed their data dependency but added that
they will proceed carefully. </li><li>The <a href="https://www.forexlive.com/news/us-september-cpi-37-yy-versus-36-yy-expected-20231012/">US CPI</a> beat expectations on the headline
figures, but the core measures came in line with forecasts and the market’s
pricing barely changed. </li><li>The <a href="https://www.forexlive.com/news/us-august-non-farm-payrolls-187k-vs-170k-expected-20230901/">labour market</a> remains pretty resilient as seen once again last
week with the beat in<a href="https://www.forexlive.com/news/us-weekly-initial-jobs-claims-198k-versus-212k-expected-20231019/">Jobless Claims</a>, although continuing claims missed for a second
time in a row. </li><li>The <a href="https://www.forexlive.com/news/us-september-retail-sales-07-versus-03-expected-20231017/">US Retail Sales</a> last week beat expectations by a big
margin with positive revisions to the prior figures, suggesting the consumers’
spending remains resilient.</li><li><a href="https://www.forexlive.com/centralbank/feds-powell-fomc-is-proceeding-carefully-20231019/">Fed Chair Powell</a>and other FOMC members continue to highlight the rise in long term yields as doing
the job for the Fed and therefore they are expected to keep rates steady in
November as well.</li><li>The market doesn’t expect the Fed to hike anymore.</li></ul><p>UK:</p><ul><li>The BoE <a href="https://www.forexlive.com/centralbank/boe-leaves-bank-rate-unchanged-at-525-vs-550-expected-20230921/">kept interest rates unchanged</a> at the last meeting. </li><li>The central bank is leaning towards
keeping interest rates “higher for longer”, although it kept a door open for
further tightening if inflationary pressures were to be more persistent. </li><li>The latest <a href="https://www.forexlive.com/news/uk-september-payrolls-change-11k-vs-0k-prior-20231017/">employment report</a> showed a slowdown in wage growth
and some job losses in September which could point to a softening labour
market. </li><li>The <a href="https://www.forexlive.com/news/uk-september-cpi-67-vs-66-yy-expected-20231018/">UK CPI</a> last week slightly beat expectations but given
the softening in the labour market it’s unlikely to change the BoE’s stance. </li><li>The <a href="https://www.forexlive.com/news/uk-september-final-services-pmi-493-vs-472-prelim-20231004/">UK PMIs</a> last month showed further contraction,
especially in the Services sector as the economy continues to slowdown.</li><li>The market doesn’t expect the BoE to
hike anymore.</li></ul><p>GBPUSD Technical Analysis –
Daily Timeframe</p><p>On the daily chart, we can see that the GBPUSD pair
bounced back and rallied all the way back to the key <a href="https://www.forexlive.com/Education/technical-analysis-trendlines-20220406/">trendline</a>. The <a href="https://www.forexlive.com/Education/technical-analysis-understanding-moving-averages-20220425/">moving averages</a> have
crossed to the upside, suggesting that the bullish momentum may be stronger,
and we could see a bigger correction to the upside. The sellers are likely to
step in around the trendline and the key resistance around the 1.2308 level
where we have also the 38.2% <a href="https://www.forexlive.com/Education/technical-analysis-using-fibonacci-retracements-20220421/">Fibonacci retracement</a> level. </p><p>GBPUSD Technical Analysis –
4 hour Timeframe</p><p>On the 4 hour chart, we can see that the GBPUSD
pair yesterday broke above a minor <a href="https://www.forexlive.com/Education/technical-analysis-support-and-resistance-20220405/">resistance</a> zone
around the 1.2220 level. The price got a bit overstretched though as depicted
by the distance from the blue 8 moving average. In such instances, we can
generally see a pullback into the moving average or some consolidation before
the next move. </p><p>GBPUSD Technical Analysis –
1 hour Timeframe</p><p>On the 1 hour chart, we can see that the
price is <a href="https://www.forexlive.com/Education/technical-analysis-understanding-divergence-20220429/">diverging</a> with
the <a href="https://www.forexlive.com/Education/technical-analysis-understanding-macd-20220427/">MACD</a> right
at the trendline. This is generally a sign of weakening momentum often followed
by pullbacks or reversals. In this case, from a risk management perspective, a
pullback into the previous <a href="https://www.forexlive.com/Education/technical-analysis-polarity-20220408/">resistance turned
support</a> around the 1.2220 level will give the buyers a better
level where to buy from as they will also have the <a href="https://www.forexlive.com/Education/technical-analysis-confluence-20220318/">confluence</a> with
the red 21 moving average and the 38.2% Fibonacci retracement level. The
sellers, on the other hand, will want to see the price breaking below the
counter-trendline to increase the bearish bets and target new lows. </p><p>Upcoming Events</p><p><a href="https://www.forexlive.com/EconomicCalendar">Today</a> we will get the last part of the UK Labour
Market report where a miss to the expectations might weaken the pound, and later
in the day we will also see the latest PMIs for the UK and the US. On Thursday,
we will see the US Jobless Claims figures, while on Friday we get the US PCE
report which is not expected to change anything for the Fed at this time. </p>

This article was written by FL Contributors at www.forexlive.com.