- GBP/USD is meandering near weekly lows amid the looming UK political crisis.
- Markets are risk averse but the US dollar fails to capitalize ahead of data, Fedspeak.
- Cable needs daily closing below 1.1222 to extend the ongoing bearish momentum.
GBP/USD is trading on the back foot in the European session, keeping its range around 1.1200, as sellers retain control amid looming concerns over the UK leadership crisis. Although some Conservative (Tory) MPs continue to show their confidence in the UK PM Liz Truss, several backbenchers are calling for leadership replacement after the recent fiscal fiasco.
According to the ITV television channel, some ministers noted that PM Truss will be asked to resign, either in the coming days or after October 31. Meanwhile, TimesRadio reported that three Tory MPs told the British media outlet that Liz Truss needs to resign now. Britain's Interior Minister Suella Braverman’s abrupt resignation on Wednesday raises doubts about PM Truss’ leadership authority and the UK political tensions are keeping cable at weekly lows.
Further, comments from BoE deputy governor Ben Broadbent are also exerting downside pressure on the pound. Broadbent casts doubts on market pricing prompting a further reduction in expectations for the terminal rate by around 15 bps since the close on Wednesday. The BoE deputy governor said that "whether official interest rates have to rise by quite as much as currently priced in financial markets remains to be seen.”
However, losses in the major appear capped by a broadly weaker US dollar even as the Treasury yields hold near multi-year highs. Attention now turns towards the US Jobless Claims and Housing data while speeches from Fed officials will be also closely scrutinized for fresh dollar valuations.
From a short-term technical perspective, GBP/USD has breached the rising trendline support on the daily chart, aligned at 1.1222.
A daily close below the latter is needed to confirm a downside break and extend the downtrend towards the mildly bearish 21-day Simple Moving Average (SMA) at 1.1132.
Further south, the 1.1100 figure will be on sellers’ radars. The 14-day Relative Strength Index (RSI) is inching lower below the midline, favoring the bearish bias going forward.
GBP/USD: Daily chart
On the flip side, recapturing the abovementioned trendline support-turned-resistance is critical for any meaningful recovery in the pair.
The next upside barrier for bulls is seen at the previous day’s high of 1.1358, above which the descending 50 DMA at 1.1444 could come into play.
GBP/USD: Additional technical levels
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