GBP/USD To Stage Relief Rally On Hawkish BoE Inflation Report

 

EUR/USD Daily

Chart – Created Using Trading View

• The bear-flag formation in EUR/USD may continue to shape going into November as the Euro-Zone’s Gross Domestic Product (GDP) report is expected to show the growth rate expanding another annualized 1.6% in the third-quarter of 2016, while the core Consumer Price Index (CPI) is projected to hold steady at an annualized 0.8% in October; a series of positive developments may spark a bullish reaction in the single-currency, but the broader outlook remains tilted to the downside as price & the Relative Strength Index (RSI) preserve the bearish trends carried over from August.
• May see growing expectations for a meaningful announcement at the European Central Bank’s (ECB) December 8 policy meeting as the Governing Council looks poised to adjust the duration as well as the guidelines of the non-standard measures, but more of the same from President Mario Draghi and Co. may spark a ‘taper tantrum’ should the committee preserve the March 2017 deadline for the asset-purchase program.
• A closing price above 1.0940 (61.8% retracement) may push EUR/USD towards the top of the near-term channel, with aligns with the next topside region of interest coming in around 1.0970 (38.2% retracement).

GBP/USD Daily

Chart – Created Using Trading View

• GBP/USD may remain range-bound ahead of the Bank of England’s ‘Super Thursday’ event as Governor Mark Carney and Co. are scheduled to deliver the updated quarterly inflation report (QIR); the fresh projections may trigger a relief rally in the British Pound should the central bank highlight a growing risk of overshooting the 2% target for price growth.
• Even though the BoE warns ‘a majority of members expect to support a further cut in Bank Rate to its effective lower bound,’ the recent comments from Governor Carney suggest the Monetary Policy Committee (MPC) will preserve a wait-and-see approach going into 2017 as the marked depreciation in the exchange rate is expected to push the economy from ‘no inflation to some inflation.’
• Broader outlook for GBP/USD remains tilted to the downside, with near-term resistance coming in around 1.2360 (50% expansion); waiting for a close below 1.2100 (61.8% expansion) to open up the next downside region of interest coming in around 1.1680 (161.8% expansion) to 1.1730 (78.6% expansion).