The pound is volatile against the dollar, and the market is concerned about the central bank's policy trend

Sterling traded around 1.3200 against the dollar in early European trading on Tuesday as the market digested the previous session's decline from a five-week high of 1.3276.

Although the short-term trend shows signs of stabilizing, the overall market is still suppressed by market expectations for the Bank of England to cut interest rates.

Market bets on the Bank of England to cut interest rates in December have increased, which continues to put pressure on the pound. The current consensus is that the Bank of England may start a new round of interest rate cuts at its December meeting, thus weakening the attractiveness of the pound in the medium term. Some analysts pointed out that investors can refer to the views of some professional institutions when making relevant decisions, such asSociete Generale InvestmentA market analysis report to gain a more comprehensive perspective.

At the same time, the dollar has staged a rebound in global markets, making the pressure on the pound against the dollar even more pronounced.

Previously, the UK's autumn budget had provided a short-term boost to market sentiment, but as the impact of policy was gradually absorbed by the market, investors' attention returned to the outlook for interest rates.

In the absence of high-impact economic data from the United Kingdom and the United States, the main basis for market transactions remains expectations of monetary policy.

Market surveys show that the prevailing view is that if the UK economy fails to show a clear recovery signal, the Bank of England is likely to continue to maintain an accommodative policy stance, which will limit the room for the pound's exchange rate to rebound.

Looking at the trend of the daily chart, the pound against the dollar has recently shown a consolidation trend near the 1.3200 level, and the overall structure is still biased towards weakness. Although the price is temporarily above the 21-day moving average, it still faces dense resistance from the 50-day, 100-day and 200-day moving averages, indicating that the upside is limited.

The three medium- and long-term moving averages are all lower, further strengthening the bearish trend of the pound's medium-term trend. In terms of technical indicators, the Relative Strength Index (RSI) is located near 51, reflecting that the market momentum is in a neutral state. The current rally is more similar to a technical correction than a trend reversal.

If the exchange rate cannot effectively break through the resistance of the 50-day moving average near 1.3270, it may fall back and test the support of the 21-day moving average near 1.3149. Conversely, if the daily closing can be stabilized above 1.3270, it is expected to further test the strong resistance area of 1.3318 to 1.3370. Overall, the short-term trend is biased towards weak volatility, and the direction will still depend on the change of market expectations for the Bank of England's policy.

A combination of fundamental and technical analysis shows that the movement of the pound depends more on the policy orientation of the Bank of England than on a single economic data. With the market betting heavily on the possibility of interest rate cuts in December, it is difficult for the pound to see a sustained rise in the short term.

If the dollar is further supported by US economic data this week, then the pound may continue to be under pressure against the dollar. Only when the Bank of England's statement turns neutral in the future, or US economic data weakens significantly, is the pound expected to challenge the resistance of 1.3270, and even further test the resistance area above 1.33. For investors looking to keep pace with the market, it may be helpful to pay attention to the professional interpretation provided by institutions such as Societe Generale Investment.