GBPUSD Forecast: Pound Sterling looks for support before next leg higher

GBPUSD has staged a correction and declined below 1.1800 during the Asian trading hours on Monday with investors taking a step back and reassessing the market situation following last week's risk rally. The pair seems to have found interim support at 1.1750 and the technical outlook suggests that buyers look to dominate the pair's action in the near term.  

Commenting on the market reaction to the soft October Consumer Price Index data, Federal Reserve Governor Christopher Waller pushed back against optimism by saying that markets were "way out in front." Waller added that the 7.7% annual CPI was still "enormous." Meanwhile, "If I can do one thing for the public, I would say: stop thinking about pace and start thinking about level," San Francisco Federal Reserve Bank President Mary Daly told the Financial Times (FT).

In the absence of high-impact macroeconomic data releases, market participants will pay close attention to what Fed officials say. US Federal Reserve Vice Chair Lael Brainard and NY Fed President John Williams are scheduled to speak later in the day. 

In case safe-haven flows return to markets and Wall Street's main indexes turn south after last week's impressive upsurge, the US Dollar could keep its footing and limit GBPUSD's upside and vice versa.

On the other hand, investors could refrain from making large bets while waiting for the UK government to unveil its budget plan on Thursday. "I think I've been completely explicit that taxes are going to go up and that's a very difficult thing for me to do because I came into politics to do the exact opposite." Chancellor Jeremy Hunt told the BBC on Sunday.

GBPUSD Technical Analysis

GBPUSD seems to have met interim support at 1.1750 (static level, former resistance) following the decline witnessed during the Asian trading hours. On the upside, 1.1850 (static level) aligns as next resistance. In case the pair flips that level into support, it could target 1.1900 (former support, psychological level) and 1.2000 (psychological level).

On the downside, a four-hour close below 1.1750 could open the door to an extended slide toward 1.1700 (psychological level, Fibonacci 23.6% retracement of the latest uptrend) and 1.1650 (20-period Simple Moving Average (SMA)).

It's worth noting that the Relative Strength Index (RSI) indicator on the four-hour chart retreated below 70, suggesting that GBPUSD has room on the upside before it needs to make another downward correction.