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Rate Decisions, US elections & Employment Data: Volatile Week Expected on the GBPUSD

FTSE - Trump

Next week promises to be a loaded week for USD pairs. The emphasis of this piece is on the GBPUSD. This past week, the pair came under pressure from the risk aversion that swept the markets on Wednesday and Thursday. Friday’s slight gains were mostly due to sellers unwinding some positions as they cautiously prepare for the slew of economic data that will be released next week. 

Kicking off the show will be the US elections on Tuesday. This is bound to generate a lot of volatility, especially with the real possibility of a stalemate.  US President Donald Trump had hinted at a possible contest of results in court in the first debate, and a stalemate could mean trigger a flight to safety: a USD-positive situation.

Next will be the interest rate decisions of the Federal Reserve as well as the Bank of England. On the UK side of the equation, it will be a question of whether the BoE will implement the much anticipated negative rates, or at least show some indications that this may be a future consideration. This could be GBP-negative.

Not much is expected from the Fed. Any references to the worsened coronavirus situation in the US could be telling. 

Closing the show will be Friday’s non-farm payrolls report which will indicate the unemployment situation in the US public sector (ex. agriculture) for October. Recent employment data have been encouraging, and the markets will look to see if this trend can continue. 

New lockdowns and more Brexit news could weigh on the pound. 

Technical Outlook for GBPUSD

Today’s recovery move is a pullback towards the broken channel border on the daily chart. This move also retests the 1.29469 former support that now acts as a resistance. Rejection at that price area leads to further decline towards 1.28589, with 1.27558 and 1.26374 forming additional downside targets.

On the other hand, a break of 1.29469 allows the price to return to the channel. Any attempt to retake the channel’s return line needs to clear 1.30554 and 1.31754 first. 1.33193 and 1.34765 would only come into focus if price escapes from the channel’s upper boundary. 

GBPUSD Daily Chart