Weekly FX Review - 08 November

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For the past few weeks we have focused on the longer-term outlook on the pound, so for this week we zoom down to the 2-hour timescale.

Here we can see the mini-budget recovery highs in late October, and the more recent nervousness down to 1.1150. Price action had been able to push above the 61.8% level of this move at 1.1456, but has since moved back to this support area. Seemingly finding it difficult to break the negative trend set from the late October highs, upper white trend line.

Suggesting that continued weakness under the 1.1456 support could immediately open up moves down to 1.14, the 50% area. While breaks above the 1.1550 resistance would increase confidence to the bulls that the medium-term trend was allowing price action to push back to the 100% area, 1.165.

As regular readers may recall the longer-term outlook on the pound is much more questionable, having been in a strong negative trend for most of 2022. It remains difficult to see this trend reversing until the fundamental outlook changes greatly. While talk of a Fed pivot has continued to build, the consensus market view remains that the Bank of England will stay behind the pace of US rate hikes, likely to keep strong headwinds in place here.

So, although some near-term positivity has been able to build, we see traders still cautious, and any moves under 1.1456 could trigger quite rapid moves lower towards 1.14 and even 1.13392. Keeping a negative skew for the near term, with moves up and above 1.1665 needed to turn more outright positive.