Current trend

At the end of last month, the GBP/USD pair reached annual highs around 1.3433, after which it began to decline and currently reached 1.2939 (Murrey level [2/8]), but cannot consolidate below it yet.

The new UK government budget presented yesterday by Chancellor of the Exchequer Rachel Reeves did not cause significant movement in the market, as investors evaluated it ambiguously. The document assumes a significant increase in taxes to ensure the receipt of 40.0 billion pounds to the treasury: in particular, companies' contributions to the National Insurance Fund (NI) will increase to 15.0%, while the capital gains tax (CGT) will increase from 10.0% to 18.0% for low–rate payers and from 20.0% to 24.0% for high-rate ones. All this can put significant pressure on the business, reducing the likelihood of profit growth, which raises concerns of investors who abandon the pound. On the other hand, the government has planned to increase spending on health, education, and infrastructure upgrades, which, according to the Office for Budget Responsibility (OBR), could lead to an acceleration in inflation rates to 2.6% in the coming year. The implementation of these forecasts may give the Bank of England (BoE) grounds for refusing to ease monetary policy: experts note that next week the regulator will probably still reduce the key rate by 25 basis points, but then take a pause in the cycle of correction of borrowing costs.

The US currency is also receiving support amid expectations of a slowdown in the pace of reduction in the cost of borrowing by the US Federal Reserve from 50 basis points to 25 basis points. Today, the market is waiting for the publication of September data on the American index of personal consumption expenditures, which can confirm a further decrease in inflation: MoM, the indicator may increase from 0.1% to 0.3%, but YoY, it will decrease from 2.7% to 2.6%. The implementation of forecasts will increase the likelihood of the continuation of the "dovish" course of the monetary policy of the American regulator, albeit at a slower pace than previously expected.

Support and resistance

Technically, the price is held at 1.2939 (Murrey level [2/8]), consolidating below which will allow quotes to strengthen the downward dynamics to the levels of 1.2817 (Murrey level [1/8]) and 1.2695 (Murrey level [0/8]). If the upper line of Bollinger Bands is broken out around 1.3115, growth may continue towards the targets of 1.3305 (Murrey level [5/8]) and 1.3427 (Murrey level [6/8]).

Technical indicators confirm the possibility of further decline: Bollinger Bands and Stochastic are reversing down, and MACD is stable in the negative zone.

Resistance levels: 1.3115, 1.3305, 1.3427.

Support levels: 1.2939, 1.2817, 1.2695.

Trading tips

Short positions should be opened below 1.2939 with targets 1.2817, 1.2695 and a stop-loss around 1.3025. Implementation period: 5–7 days.

Long positions can be opened above the 1.3115 mark with targets of 1.3305, 1.3427 and a stop-loss around 1.3000.