- Investors are still digesting the news of Liz Truss’ resignation.
- Truss’s administration destroyed UK’s reputation for financial stability.
- The dollar is edging higher on rising Treasury yields.
Today’s GBP/USD outlook is bearish. The British pound dipped on Friday as traders processed Liz Truss stepped down only in six weeks office. Following Truss’ resignation announcement in the previous session, there was a brief surge to a high of $1.1338.
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“I think that was a knee-jerk reaction to at least a temporary easing of UK political uncertainty… I think markets, for now, are pretty happy about the news,” said Carol Kong, currency strategist at the Commonwealth Bank of Australia (CBA).
“But the news that we heard only removed some, but not all, of the political uncertainty in the UK economy, and we’ll still hear more on the fiscal policy front at the end of this month.”
Truss’s downfall was caused by an economic plan that rocked the markets and destroyed the nation’s credibility in the markets. The Conservative Party will choose Britain’s fifth prime minister in six years by October 28.
Also weighing on the pair was the dollar, which strengthened against a basket of currencies due to rising Treasury yields.
Federal Reserve Bank of Philadelphia President Patrick Harker stated that the central bank would continue to raise its short-term rate target amid extremely high inflation. It shows that Fed officials are not backing down from their hawkish stance.
GBP/USD key events today
Investors are expecting retail sales data from the UK. Retail Sales track changes in the total number of sales adjusted for inflation at the retail level. It is the most important gauge of consumer spending, which drives all other forms of economic activity.
GBP/USD technical outlook: Imminent fall as the 30-SMA poses a big resistance challenge
Looking at the 4-hour chart, we see the price trading below the 30-SMA and the RSI below 50, showing bears are ahead. Bulls attempted to take over when they pushed the price to the 30-SMA and slightly above. However, the SMA held as resistance, pushing the price back below.
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Bears have currently returned and look set to take the price lower. The bearish bias will become stronger if the price breaks below the 1.1150 support level, as it will start making lower lows and possibly lower highs. However, the price might retest at 1.1401 if it fails a break below 1.1150.
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Saqib Iqbal
