GBP/USD to Target $1.16 on BoE Chatter and the US Mid-Terms

It is a quiet day for the GBP/USD. According to the economic calendar, there are no UK economic indicators for the markets to consider.

While the Bank of England’s recession warning resonates, news of a gas deal with the US delivered GBP/USD support on Monday. Today, Bank of England Chief Economist Huw Pill is back in the spotlight.

Huw Pill speaks at the UBS European Conference on global monetary policy challenges (0900 BST). Later in the day, Huw Pill will also attend the Lords Economic Affairs Committee Labor Supply inquiry (1600 BST) later in the day.

Last week, the Bank’s Chief Economist talked of more action needed to bring inflation to target. More of the same should deliver GBP/USD support.

Updates on the UK Government’s Autumn Budget plans also need monitoring.

GBP/USD Price Action

At the time of writing, the Pound was down 0.19% to $1.14882. A mixed morning saw the GBP/USD rise to an early high of $1.15368 before falling to a low of $1.14771.

Technical Indicators

The Pound needs to avoid a fall through the $1.1447 pivot to target the First Major Resistance Level (R1) at $1.1604. Market risk sentiment needs to be bullish to support a return to $1.16 ahead of Huw Pill’s commentary.

In the case of a BoE-fueled extended rally, the GBP/USD would likely test the Second Major Resistance Level (R2) at $1.1699. The Third Major Resistance Level (R3) sits at $1.1950.

A fall through the pivot would bring the First Major Support Level (S1) at $1.1353 into play. However, barring a risk-off-fueled sell-off, the Pound would likely avoid sub-$1.1250 and the Second Major Support Level (S2) at $1.1196.

The Third Major Support Level (S3) sits at $1.0944.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The GBP/USD sits above the 50-day EMA, currently at $1.14080. The 50-day EMA pulled away from the 100-day EMA, with the 100-day EMA crossing through the 200-day EMA, delivering bullish signals.

A hold above the 50-day EMA ($1.14080) would support a breakout from R1 ($1.1604) to target R2 ($1.1699). However, a fall through the 50-day EMA ($1.14080) would bring the 100-day ($1.13785) and 200-day ($1.13712) EMAs and S1 ($1.1353) into view.

The US Session

It is another quiet day ahead on the US economic calendar. There are no economic indicators to guide the Dollar Spot Index (DXY). The lack of stats will leave the focus on the US mid-term elections and FOMC member chatter.

While the bets of a December Fed pivot have gathered momentum, the FedWatch Tool has the probability of a 75-basis point rate hike at 48.0%. The numbers indicate uncertainty that should increase GBP/USD sensitivity to Fed commentary.