GBP/USD: Bullish bias stays intact, 1.13 in the crosshairs

GBP/USD has gathered further bullish momentum. Pound bulls eye 1.1300 next, 

Buyers retain control of cable’s action

“On the upside, 1.1300 (Fibonacci 61.8% retracement of the latest downtrend, 100-period SMA) aligns as the next target. In case buyers flip that level into support, the pair could continue to push higher toward 1.1400 (static level) and 1.1500 (200-period SMA).”

“First support is located at 1.1130 (Fibonacci 50% retracement) before 1.1100 (psychological level) and 1.1000 (psychological level, 50-period SMA, Fibonacci 38.2% retracement).”

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Germany's Lindner: Not following British down the path of expansionary fiscal policy

German Finance Minister Christian Lindner said on Thursday that they will mobilise Germany's economic strength when necessary, as reported by Reuters.

Regarding the German government's decision to implement a price brake on gas and electricity while providing funding of up to €200 billion for an "economic defence shield," Linder said that these measures should not fuel inflation.

"We are not following the British down the path of expansionary fiscal policy," the minister explained.

Market reaction

The EUR/USD pair retreated from session highs following these comments and was last seen trading at 0.9705, where it was down 0.33% on a daily basis.

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US: International trade deficit narrows to $87.3 billion in August

US international trade deficit narrowed by $29 billion in August.

US Dollar Index clings to small daily gains above 114.00.

The data published by the US Census Bureau showed on Wednesday that the US international trade deficit declined by $2.9 billion to $87.3 billion in August from $90.2 billion in July. 

"Exports of goods for August were $179.8 billion, $1.7 billion less than July exports," the publication read. "Imports of goods for August were $267.1 billion, $4.6 billion less than July imports."

Moreover, the report revealed that the Wholesale Inventories rose by 1.3% in August, higher than the market expectation for an increase of 0.7%.

Market reaction

The US Dollar Index showed no immediate reaction to this report and was last seen posting small daily gains at 114.25.

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GBP/USD: Vulnerable to a break of parity later this year – ING

There has been a loose discussion in the market about the prospect of GBP/USD hitting parity for some months. Economists at ING believe that the pair could break under 1.00 this year.

EUR/GBP can make a run towards the March 2020 high of 0.95

“At this stage, we think UK authorities will probably just have to let sterling find its right level. The UK has a reserve currency so it can always issue debt – it’s just a question of the right price.”

“We are still bullish on the dollar this year as Fed leads the deflationary charge and global growth slows. That means GBP/USD is now vulnerable to a break of parity later this year, while – quite unexpectedly – EUR/GBP can make a run towards the March 2020 high of 0.95, with outside risk to the 2008 high of 0.98.”

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Gold Price Forecast: XAU/USD rebounds from YTD low, upside potential seems limited

Gold reverses an intraday slide to its lowest level since April 2020 amid a modest USD pullback.

Recession fears, a softer risk tone further extend some support to the safe-haven commodity.

Bets for more aggressive Fed rate hikes to limit the USD downfall and cap gains for the metal.

Gold stages a goodish bounce from its lowest level since April 2020 touched earlier this Monday and climbs to a fresh daily high during the early European session. Bulls, however, struggle to capitalize on the move beyond the $1,650 level and remain at the mercy of the US dollar price dynamics.

In fact, the USD Index, which measures the greenback's performance against a basket of currencies, surrenders its early gains to a fresh two-decade high amid a recovery in the European currencies. This, in turn, assists the dollar-denominated gold to attract some buyers near the $1,626 region. Apart from this, the prevalent cautious market mood, amid worries about a deeper global economic downturn, turns out to be another factor offering support to the safe-haven precious metal.

The attempted recovery, however, lacks follow-through buying, warranting caution before positioning for any meaningful upside. The Fed last week delivered another supersized rate hike and signalled that it will likely undertake more aggressive increases at its upcoming meetings to tame inflation. A more hawkish stance adopted by the US central bank remains supportive of elevated US Treasury bond yields and should limit any meaningful USD corrective slide, at least for the time being.

The yield on the rate-sensitive 2-year US government bond stands tall near a 15-year high and the benchmark 10-year Treasury note hits the highest in 11 years. This might further contribute to keeping a lid on the non-yielding gold. In the absence of any relevant economic data from the US, traders will take cues from speeches by influential FOMC members. This, along with the US bond yields, the USD price dynamics and the broader risk sentiment might provide some impetus to gold.

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GBP/USD slumps to fresh multi-decade lows below 1.1050

GBP/USD is down over 300 pips on the day.

The risk-averse market environment provides a boost to the greenback.

Disappointing data releases from the UK weigh heavily on GBP.

Following a consolidation phase during the Asian trading hours, GBP/USD came under heavy bearish pressure and lost more than 200 pips on the day. As of writing, the pair was trading at its lowest level since 1985 at 1.1045, down nearly 2% on a daily basis.

Earlier in the day, the data from the UK revealed that the business activity in the private sector continued to contract in early September with the preliminary Composite PMI dropping to 48.4 from 49.6 in August. This reading came in below the market expectation of 49.

Furthermore, the Confederation of British Industry's latest Distributive Trades Survey revealed that the Retail Sales Balance plunged to -20 in September from +37 in August and fueled the GBP selloff.

In addition to dismal UK data, the intense flight to safety provides a boost to the dollar and further weighs on the pair. US stock index futures were last seen losing between 1.3% and 1.6% on the day, suggesting that safe-haven flows are likely to continue to dominate the financial markets.

The US economic docket will feature S&P Global's Manufacturing and Services PMI reports later in the day.

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EUR/USD could stage a recovery if it manages to flip 0.9880 into support

EUR/USD recovered modestly during the European trading hours. The pair needs to reclaim 0.9880 to extend the rebound.

The dollar could lose interest in case US stocks rebound

“In case Wall Street's main indexes gain traction after the opening bell, the dollar could deepen its downward correction and allow EUR/USD to continue to stretch higher.”

“0.9880 (former support, static level) forms initial resistance. If EUR/USD manages to rise above that level and starts using it as support, it could target 0.9900 (psychological level), 0.9950 (static level, 20-period SMA on the four-hour chart) and 0.9980 (100-period SMA).”

“On the downside, 0.9800 (psychological level, static level) aligns as first support ahead of 0.9750 (static level from October 2002) and 0.9700 (psychological level).”

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