Current trend

During yesterday’s session, the GBP/USD pair renewed a two-month low of 1.2843 amid a sharp rise in bonds after the publication of the first budget of the new UK Labor government.

The document includes tax increases of 40.0B pounds to offset a significant deficit in public finances, allowing market participants to invest in public services. Thus, corporate contributions to the National Insurance (NI) Fund will increase to 15.0%, and the Capital Gains Tax (CGT) – from 10.0% to 18.0% for taxpayers with a low rate and from 20.0% to 24.0% for taxpayers with a high rate, putting significant pressure on businesses. In addition, the government has planned to increase spending on upgrading the health, education, and infrastructure sectors, which, according to the Office for Budget Responsibility (OBR), could lead to an inflation growth of 2.6% next year. Against this, 30-year debt securities rose in price by 0.286%, from 4.545% to 4.831%, weakening the pound. On the other hand, the Office for Business Responsibility (OCR) has revised its inflation forecasts for 2024 from 2.2% to 2.5%, which could affect the Bank of England’s interest rate decision on November 7. The officials may leave it at the current level or cut it less significantly than investors expect, supporting the pound.

Today, at 14:30 (GMT 2), the US will publish October data on nonfarm payrolls. A slowdown from 254.0K to 106.0K may follow. If the actual value significantly exceeds the forecasts, the American dollar will strengthen, and the GBP/USD pair will continue its negative dynamics. Otherwise, a reversal from the support level of 1.2855 and growth to the resistance area of ​​1.3055 is likely.

Support and resistance

The long-term trend remains upward. Within a downward correction, the trading instrument broke the support level of 1.3000 at the end of October and reached 1.2855 yesterday. After a reversal, growth to the area of ​​1.3055 and 1.3400 (October high) may resume.

The medium-term trend reversed downwards after a breakdown of the target zone 1.3130–1.3100 in early October. This week, the price approached zone 2 (1.2826–1.2795). After a breakdown, a decline to the area of ​​1.2522–1.2491 may follow. Otherwise, an upward correction to the area of ​​the key trend resistance 1.3178–1.3147 will begin, where short positions with the target at the weekly low of 1.2845 are relevant.

Resistance levels: 1.3000, 1.3055, 1.3400.

Support levels: 1.2855, 1.2680, 1.2525.

Trading tips

Long positions may be opened from 1.2855, with the target at 1.3055 and stop loss 1.2793. Implementation period: 9–12 days.

Short positions may be opened below 1.2793, with the target at 1.2680 and stop loss 1.2842.