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GBP Trading Remained Cautious as Budget Proposal Emerges as Key Risk Factor
Forex
Summary:
The GBPUSD traded above 1.3100 on Tuesday as market focus shifted to U.S. economic data and the UK budget.
Buy
TradingGBPUSD
EXP
1.31185
Entry Price
1.33750
TP
1.29800
SL
1.31869 +0.00230 +0.17%
0
Point
Flat
1.29800
SL
CLOSING
1.31185
Entry Price
1.33750
TP
Fundamentals
During the European session on Tuesday, the GBPUSD traded sideways above the 1.3100 level. Pound trading remained cautious ahead of UK Chancellor of the Exchequer Rachel Reeves' budget announcement on Wednesday. Meanwhile, broad dollar weakness provided some support for the GBPUSD.
Recently, UK bondholders have been enjoying their best returns since the COVID-19 pandemic, but they are bracing for the government's upcoming tax and spending plans, which will determine whether bond investors succeed or fail this year.
UK Chancellor of the Exchequer Rachel Reeves is expected to announce a series of measures to help achieve debt targets when she presents the budget on Wednesday. Her first budget speech last year triggered a sell-off, while the bond market still bears scars from the crash caused by former Prime Minister Truss's fiscal policies.
This represents a major risk event for the UK government bond market, valued at £1.7 trillion (US$2.2 trillion). Fund managers have now reduced their exposure ahead of November 26. The UK deficit remains a key focus for bond investors, and recent reports that Reeves will not raise income tax have reignited investor concerns.
Technical Analysis
The GBPUSD maintains a neutral-to-bullish bias for the day, with potential resistance near the 1.3150-1.3160 range. A break above this range could trigger fresh short covering, pushing the quote toward the psychologically significant 1.3200 level. Subsequent buying interest should help sustain the upward momentum, challenging the technically significant 200-day SMA near 1.3300.
On the downside, a break below 1.3008 could extend the decline from the 138.2% retracement level (1.2831) of the previous range between 1.3725 and 1.3787 down to 1.3140.
Overall, if bulls manage to break above 1.3247 decisively, it would indicate that the decline from 1.3787 may have completed its correction.
Trading Recommendations
Trading Direction: Buy
Entry Price: 1.3100
Target Price: 1.3375
Stop Loss: 1.2980
Valid Until: December 11, 2025 23:55:00
Support: 1.3097, 1.3038, 1.3011
Resistance: 1.3217, 1.3247, 1.3288
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