With the yen strengthening, should we keep a close eye on the pound, which is holding up well on the downside?

With the yen strengthening, should we keep a close eye on the pound, which is holding up well on the downside?

27.10.2022

The previous day, the U.S. dollar became the weakest currency as the Dollar Index fell below the key 110 level to 109.7. The GBP/USD pair rose by approximately 200 pips from 1.1431 to 1.1638, forming an uptrend along the 10-period moving average (MA) on the hourly chart.On the 4-hour chart, the pair has already broken above the 200 SMA, and on the daily chart, it is positioned just below the 75 MA. It will be interesting to see whether the pair will rise from its current level of 1.1607 after a corrective pullback.

Amid a strengthening yen, the pound held its ground against the yen. The GBP/JPY pair rose by about 120 pips from 169.292 to 170.597, breaking through the key 170-yen level to hit a new high for the year.Since the daily RSI has not yet reached the overbought level of 70—leaving some room to run—we will be watching closely to see if economic data releases during European trading hours drive the pair higher. However, on the hourly chart, the RSI has shown a short-term reversal, so we should remain cautious of a corrective pullback.

Today, the German GfK Consumer Confidence Index will be released at 15:00 during Asian trading hours, followed by Turkey’s trade balance at 16:00 during European trading hours,at 21:15 during European trading hours, the ECB will announce its policy rate and statement; at 21:30 during U.S. trading hours, the U.S. will release initial jobless claims, third-quarter GDP, personal consumption expenditures, the core PCE deflator, and durable goods orders;at 21:45, a press conference by ECB President Lagarde; at 23:30, U.S. weekly natural gas inventories; at 24:00, the U.S. Kansas City Fed Manufacturing Activity Index; and at 26:00, a U.S. 7-year Treasury auction.With the yen strengthening, we will be closely monitoring the movement of the pound, which is showing strong support on the downside.