Currency Pair of the Week: GBP/USD

This has the potential to be a volatile week for GBP/USD


Its hard to find another pair that should have more volatility than GBP/USD this week.  Elections, coronavirus, Brexit, BOE meeting, FED meeting and Non-Farm Payrolls all have the potential to move this pair!  Be careful of headline risk!

Even if the US Presidential Elections were not this Tuesday, there would be a lot of headline risk this week for GBP/USD.  There are plenty of predictions as to which way the US Dollar will move depending on not only the Presidential election outcome, but also whether the new President will have both the Senate and House of Representatives behind him.  Click here for our full election coverage  and make sure to follow us in our live election blog on Tuesday evening.  The Federal Reserve’s November is  pushed back 1 day due to the election.  However, expectations are for unchanged on rates and for no new bond buying.  With the possibility of not knowing the election outcome before the Fed decision, all eyes will be focused on the press conference.  On Friday, the US releases Non-Farm Payrolls.  Expectations are for an additional 600K jobs added to the economy in October after 661K were added in September.  However, this may be a side show if Joe Biden wins the election, as we would have a lame-duck President for the next few months. 

The UK will enter lockdown again on Thursday.  The announcement over the weekend was a 180 degree turn for PM Boris Johnson from earlier in the week as he had been stating there would not be a national lockdown.  However, this time around, schools, colleges and universities and manufacturing businesses will remain open.  Officials from the UK and EU are meeting in Brussels this week to try and nail down a trade deal.  The EU has apparently softened its stance on fisheries, allowing for a possible breakthrough in talks.  The BOE meets this week on Thursday as well.  Expectations are that the central bank will do “something”.  With the new lockdown likely to cut into Q4 GDP, the BOE will try to stay ahead of the data. Some think they may cut rates from 10bps to 0bps, therefore setting the table for negative rates at the next meeting.  They may also increase QE.   

With the potential for large moves over the next few weeks in GBP/USD, let’s look at some key support and resistance levels.  The pair can break lower if Trump wins by a large amount, a no-Brexit deal, or the coronavirus breakout in the UK becomes worse.  The 38.2% Fibonacci retracement level from the March lows to the September lows  and the September 23rd lows are near 1.2675, the 50% retracement level is 1.2464 and there 61.8% Fibonacci retracement level is near 1.2200.  If price breaks below there, it can quickly fall to a support zone near 1.1400 and 1.1600.  On the top side there is trendline resistance at 1.3080, horizontal resistance at 1.3175, the September highs at 1.3485, long-term horizontal resistance from early 2018 near 1.3710.  These resistance levels may be reached with a quick Brexit deal, a vaccine for the coronavirus, or a less dovish BOE than expected. 

Sources: Tradingview,

On a 240 minute timeframe, volatility has already started as GBP/USD took out the bottom of a short-term term descending triangle at 1.2910 and bounced back.  The next short-term support is near 1.2775.  First short-term resistance is the downward sloping trendline of the short-term triangle neat 1.2980.

Sources: Tradingview,

This has the potential to be a volatile week for GBP/USD.  Traders need to be ready for headline risk and use appropriate risk/reward money management.

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