GBP/USD Forecast: Former Support Zone Back in Focus

US Dollar Outlook: GBP/USD

GBP/USD trades to a fresh weekly high (1.2226) following the limited reaction to the Federal Reserve interest rate decision, and the exchange rate may stage further attempts to test the former support zone around the May low (1.2308) as it holds within the October range.

GBP/USD Forecast: Former Support Zone Back in Focus

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GBP/USD extends the advance from the start of the week even as the Bank of England (BoE) votes 6 to 3 to keep the Bank Rate at 5.25%, and recent price action puts the monthly opening range for November in focus as it bounces ahead of last month’s low (1.2037).

US Economic Calendar

FOREX.com Economic Calendar

At the same time, the update to the US Non-Farm Payrolls (NFP) report may sway GBP/USD as the economy is projected to add 180K jobs in October, and signs of a resilient labor market may push the Fed to pursue a more restrictive policy as ‘the process of getting inflation sustainably down to 2 percent has a long way to go.’

As a result, a positive development may generate a bullish reaction in the US Dollar as it fuels speculation for higher US interest rates, but a weaker-than-expected NFP report may fuel the recent rebound in GBP/USD as it raises the scope of seeing Fed policy unchanged over the remainder of the year.

With that said, the opening range for November is in focus for GBP/USD as it bounces back ahead of last month’s low (1.2037), but the exchange rate may track the negative slope in the 50-Day SMA (1.2309) should it stage another failed test of the former support zone around the May low (1.2308).

GBP/USD Price Chart –Daily

Chart Prepared by David Song, Strategist; GBP/USD on TradingView

GBP/USD may attempt to retrace the decline from the October high (1.2226) as it extends the advance from the start of the week, with a break/close above the 1.2300 (50% Fibonacci retracement) to 1.2390 (38.2% Fibonacci extension) region opening up 1.2470 (50% Fibonacci retracement).
However, GBP/USD may track the negative slope in the 50-Day SMA (1.2309) if it stages another failed test of the former support zone around the May low (1.2308), with a move below the 1.2080 (23.6% Fibonacci extension) to 1.2090 (78.6% Fibonacci retracement) raising the scope for a test of the October low (1.2037).
Next area of interest comes in around 1.1920 (38.2% Fibonacci extension) followed by the 1.1780 (50% Fibonacci extension) to 1.1840 (38.2% Fibonacci retracement) region, which incorporates the yearly low (1.1803).

Additional Market Outlooks

USD/JPY on Cusp of Testing 2022 High as BoJ Only Tweaks YCC

US Dollar Forecast: AUD/USD Poised for Test of 50-Day SMA Ahead of Fed

--- Written by David Song, Strategist

Follow on Twitter at @DavidJSong

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