GBPUSD
The British Pound (GBP) against the US Dollar (USD) is showing a decline in the European market on Tuesday. This is undoing some of the 0.65% increase we saw on Monday. The reason for this decline is weaker than expected growth in UK salaries, which is causing concern for those who want another rate hike from the Bank of England (BoE).
Everyone is waiting for the UK's inflation report for September, which will be released on Wednesday. The forecast is 6.5% year-on-year, compared to 6.7% in August, and the core is forecasted at 6.0% compared to 6.2% in August. If the September figure meets or falls below expectations, it will further discourage a hawkish view on rates and keep the pound on the defensive.
The recent drop in value is putting pressure on the initial support level at 1.2141 (the upward trend line from the 1.2037 low), before a crucial point at 1.2122 (Friday's low). If it falls below this, it could signal further decline and risk retesting the October 4 low at 1.2037.
The converged 10/20 day moving averages at 1.2200/13 are a crucial barrier. If it breaks through this level and stays above it, it could sideline immediate downside threats and pave the way for a new recovery.