Daily Key points: UK’s tax plan triggers IMF response

The sterling rebounded from its all-time lows yesterday, ending the day in the greens, however in today’s session it started leaking once again. Particularly worrisome, was the IMF warning issued to the UK government, stating “given elevated inflation pressures in many countries, including the UK, we do not recommend large and untargeted fiscal packages, at this juncture, as it is important that fiscal policy does not work at cross purposes to monetary policy”. IMF’s warning to the UK government to re-evaluate its new tax cut plan reflects the concerns of the global economic scene, as recession worries intensify and may lead to a wider spillover that could destabilize the global economy. Moreover, the pound remains at very low levels against the USD and that could drive inflationary pressures higher in the coming months.

Chorus of Fed speakers

A parade of Fed policy makers deliver speeches today namely the Atlanta Fed President Bostic, St. Louis Fed President Bullard, Fed Board Governor Bowman, Richmond Fed President Barkin and Chicago Fed President Evans and the market will be watching for any clues or deviations from the so far, unified ‘curbing inflationary pressures at all costs’ narrative. Should Fed speakers deliver their hawkish commentary as expected we may see the dollar continue to reign supreme. Furthermore, Fed Chair Powell is also scheduled to deliver a speech today and it is expected to maintain its hawkish stance. As for financial releases today, we would note from the US the release of the Pending home sales for August and the rate is expected to show another contraction which may weigh on the greenback, hinting at a discouraged US housing market amidst a period of persistently higher inflationary pressures.

Nord Stream pipelines spotted leaking

We have to mention the nonetheless disturbing news coming from Europe, where three Nord stream pipelines have been reportedly leaking natural gas into the Baltic Sea and some sources are calling for a possible sabotage. The event is set as another hurdle for the European continent to overcome in an already challenging, fast approaching winter.

GBP/USD edged lower today and currently closes in the 1.0630 (S1) support level, as the pound continues to be under pressure. We continue to hold a sideways bias however we can’t help but notice the bearish tendencies being present which could force us to switch our assessment. We see the case for the pair to stabilize further yet note that the RSI indicator below our 4-hour chart is between the readings of 50 and 30 which may imply that a bearish sentiment are still surrounds the pair. Should the bears regain control over cable we may see it breaking the 1.0630 (S1) support line and aim for the 1.0525 (S2) support level. On the flip side should the bulls take over, we may see the pair breaking the 1.0815 (R1) resistance line and aim for the 1.0927 (R2) level.

EUR/USD continues its descend and currently it flirts with the 0.9544 (S1) support line. We maintain a bearish bias for the continuation of the pairs’ price action given the descending trendline initiated on the 20^th of September. The RSI indicator remains stuck on the 30 oversold level highlighting the negative sentiment surrounding the pair. Should the pair encounter buying orders we may see it breaking the descending trendline, break the 0.9700 (R1) line and aim for the 0.9814 (R2) resistance base. Should a selling interest overwhelm, we may see the break of the 0.9544 (S1) line and move close to the 0.9460 (S2) support level.

Other highlights for the day:

We would like to note the release of Germany’s Gfk Consumer sentiment for October and France’s consumer confidence for September, as well as the weekly EIA crude oil inventories out of US.

GBP/USD H4 Chart

Support: 1.0630 (S1), 1.0525 (S2), 1.0395 (S3)

Resistance: 1.0815 (R1), 1.0927 (R2), 1.1065 (R3)

EUR/USD H4 Chart

Support: 0.9544 (S1), 0.9460 (S2), 0.9340 (S3)

Resistance: 0.9700 (R1), 0.9814 (R2), 1.0000 (R3)

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