The GBP/USD pair has been gaining in value since the beginning of this month amid the cancellation by the British government of decisions on a significant reduction in the fiscal burden for households and businesses, as well as a likely slowdown in the pace of monetary tightening in the United States amid a less serious than expected growth in consumer and wholesale prices in October (7.7% and 8.0%, respectively). Analysts believe that the US regulator will reduce the rate of interest rate adjustment from the current 75.0 basis points or temporarily suspend it to assess current economic results. Despite warnings from US Federal Reserve officials that the fight against unprecedented inflation continues and the interest rate peak could eventually be much higher than expected, investors continue to leave the US currency for alternative assets.
However, the upward dynamics of the GBP/USD pair may come under pressure in the event of a negative market reaction to the budget plans of the British government, which will be presented today by Treasury Secretary Jeremy Hunt. He is expected to announce tariff hikes and spending cuts totaling up to 50.0B pounds to offset public spending amid rising public debt and restore investor confidence in the national financial market. Some experts believe that officials' calculations may not come true, and the budget will be met negatively, as excessive savings will put even more pressure on industries and households, exacerbating the recession. Assessing such prospects, the government may provide in the document assistance measures for low-income citizens, for example, regarding the payment of electricity bills. In general, the publication of budget plans will be the most important economic event for British investors this week and may cause significant fluctuations in the national currency.
The GBP/USD pair is testing 1.1962 (Murrey [+1/8]), the breakout of which will give the prospect of further growth to 1.2207 (Murrey [+2/8]) and 1.2500. The key for the "bearish" level is the middle line of Bollinger bands around 1.1560, the breakdown of which may lead to the resumption of the downward movement to 1.1230 (Murrey [6/8]) and 1.0986 (Murrey [5/8]).
Technical indicators signal a continuation of the short-term uptrend: the chart shows a reversal of Bollinger bands and an increase in the MACD histogram in the positive zone. However, Stochastic is preparing to leave the overbought zone, which does not exclude the beginning of a correction.
Resistance levels: 1.1962, 1.2207, 1.2500. | Support levels: 1.1560, 1.1230, 1.0986.