GBP may have 'Truss' issues, but it can still move higher
The British pound suffered a flash crash yesterday as Asian traders reacted to the UK’s mini budget, which many suspect will exacerbate inflation and increase debt. Some are already calling for a vote of no confidence for PM Truss.
GBP/USD hit a record low before rebounding over 5% and GBP/JPY saw levels of volatility not seen since Brexit. And these levels of volatility did not go unnoticed by the BOE, who vowed they "will not hesitate to act" and raise rates to defend the pound if required. At one point yesterday money markets were pricing in a 200bp hike by November. And this has allowed GBP/USD to find some stability and shows the potential for another leg higher.
The 1-hour chart shows that prices pulled back to a 50% retracement level and the monthly S1 pivot point, just above 1.0600. Momentum is now turning higher in the Asian session and we suspect is is part of an ABC correction against yesterday's selloff.
• The initial target is around 1.0863 (38.2% Fib projection)
• Perhaps it can rise to 1.1000 is the BOE keep up their hawkish rhetoric
GBP/USD hit a record low before rebounding over 5% and GBP/JPY saw levels of volatility not seen since Brexit. And these levels of volatility did not go unnoticed by the BOE, who vowed they "will not hesitate to act" and raise rates to defend the pound if required. At one point yesterday money markets were pricing in a 200bp hike by November. And this has allowed GBP/USD to find some stability and shows the potential for another leg higher.
The 1-hour chart shows that prices pulled back to a 50% retracement level and the monthly S1 pivot point, just above 1.0600. Momentum is now turning higher in the Asian session and we suspect is is part of an ABC correction against yesterday's selloff.
• The initial target is around 1.0863 (38.2% Fib projection)
• Perhaps it can rise to 1.1000 is the BOE keep up their hawkish rhetoric