GBPUSD Advances, Tests Solid Resistance
29 September 2022
Sterling has tried to remain in positive territory today, fighting to jump above the major short-term resistance near 1.0930.
If successful, sentiment could improve, pushing the Pound and other risk assets higher.
BoE saves the day
With the introduction of Prime Minister Liz Truss' budget, the UK's economic outlook recently took a turn for the worst. US Treasury rates shot up to their highest levels since 2010, and the British pound fell to its lowest point in 37 years.
Early on Wednesday, British 30-year bond rates reached their highest level since 2002, and dealers said that it was getting harder and harder to purchase and sell bonds since no one wanted to take the risk of keeping such a volatile asset.
However, the 30-y bond yields dropped by 100 basis points following the Bank of England's intervention on Wednesday, which involved the purchase of about 65 billion pounds of long-dated gilts.
When asked if she is ashamed of the government's budget, "I think we should remember the situation the country was facing," British Prime Minister Liz Truss said on Thursday, as reported by Reuters.
Truss further reiterated that they are working closely with the Bank of England. "We have seen difficult markets around the world, I am clear that the government has done the right thing," the PM added. "As the PM, I am prepared to take difficult decisions and do the right thing."
There is an excellent short-term triangle pattern on the one-hour chart, with the resistance spotted at 1.0930. If bulls push the price above that resistance, we might see a solid relief rally toward the psychological level of 1.10.
Alternatively, there is an upward support line near 1.07 and if the price declines below it, the bearish trend could return, targeting 1.0550 or possibly the current lows near 1.04. Volatility will likely remain elevated in the near future.