Current dynamics

The pound is trading near 1.2655 in the morning session, creating uncertain trading dynamics in the ultra-short term, following yesterday's sharp decline when the UK released key statistics on consumer and industrial inflation that could influence the Bank of England's future decisions on monetary policy.

Thus, in October, the consumer price index increased from 1.7% to 2.3% compared to the same month of the previous year, exceeding the market estimate of 2.2%, and increased from 0.0% to 0.6% compared to the previous month, exceeding the preliminary estimate of 0.5%. For the same period, the core indicator excluding food products and energy costs changed from 3.2% to 3.3%, against the calculations of 3.1%, while the producer price indicator without seasonally adjusted changes from 1.4% to 1.7% compared to the previous year and from 0.0% to 0.3% compared to the previous month. Market participants also noted the rapid growth of the retail price index from 2.7% to 3.4% and from -0.3% to 0.5%, respectively. Thus, inflationary pressure in the economy is increasing due to the tax increase. Bank of England Governor Andrew Bailey previously said that businesses could pass on these costs to consumers due to the indexation of contributions to the national insurance system, and in these circumstances, the fiscal authorities' refusal to adjust interest rates in December and a slowdown in the pace of monetary policy easing next year became a more likely scenario.

Kansas City Federal Reserve Bank President Jeffrey Schmid said it was not yet known how much borrowing costs in the U.S. would fall, but the beginning of the "dovish" cycle reflected fiscal authorities' confidence that the consumer price index was moving toward the 2.0% target and that the labor sector and goods markets were close to equilibrium. He did not comment on the possibility of the indicator being adjusted to -25 basis points in December, but noted that the increase in government debt could lead to the maintenance of high interest rates in the long term to control inflation.

Today, investors are focusing on U.S. releases. At 3:30 p.m. GMT 2, they will be watching for initial jobless claims, which could rise from 217,000 to 2,200,000 for the week of Nov. 15, while continuing claims could consolidate at 1.873 million for the week of Nov. 8.

Support and Resistance levels

On the daily chart, Bollinger bands show a steady decline. The price range is narrowing, reflecting the emergence of uncertain trading dynamics in the ultra-short term. MACD is trying to reverse and settle above the signal line to form a new buy signal. However, Stochastic shows a more confident growth and is consolidating approximately in the middle of the work area, indicating the potential for a "bullish" breakout soon.

Resistance levels: 1.2700, 1.2730, 1.2776, 1.2817.

Support levels: 1.2650, 1.2600, 1.2568, 1.2539.

Trading tips

Short positions can be opened after the downside break of 1.2600 with a target of 1.2500. Stop loss – 1.2650. Trading period: 2-3 days.

Long positions can be opened after breaking 1.2700 with a target of 1.2800. Stop loss – 1.2650.