Taking into account the October trading that ended last Friday, in today's review we will consider the monthly timeframe, summarize the results of the past five days and determine the prospects of the British pound sterling in pair with the US dollar. There is no way to ignore the important events that the GBP/USD currency pair will experience this week. Let's start with them.
So, tomorrow, November 3, the US presidential election will take place, which will undoubtedly have an impact on the price dynamics of the US currency. Most experts believe that Joe Biden's victory will lead to an increase in the craving for risky assets and a weakening of the US dollar. However, although Biden has been ahead of the incumbent Trump in polls for a long time, the US dollar is feeling quite confident and strengthening across a wide range of the market. In recent years, it has become a trend to challenge elections held in a particular country and not recognize their results, which leads to mass riots, and sometimes to a violent seizure of power. Given the fact that both US presidential candidates have more than hinted that they will not admit their defeat, it is likely that in the cradle of world democracy there will be serious problems with recognizing the results of the presidential election. I believe that this prospect, along with the invasion of the second wave of COVID-19, supports the US dollar as a protective asset. Indeed, in this situation, there can be no appetite for risk, the whole world is waiting with interest for the results of the US presidential election and what will follow.
On Thursday, November 5, the Bank of England will announce its decision on the main interest rate, the volume of the asset purchase program, and publish the minutes of its meeting, which will show how the votes of the members of the monetary policy committee were distributed. As you know, there has long been talk that the British Central Bank is considering introducing negative interest rates. In my personal opinion, this will not happen yet and the rate will remain at 0.10%. However, the asset purchase program can increase from 745 to 845 billion pounds. Such a move by the Bank of England seems most likely to counteract the negative consequences of the coronavirus epidemic. As for negative rates, the English regulator will keep this trump card up its sleeve, because it is still unclear how the Brexit process will end - with a trade agreement or without a deal.
On the last day of the trading week, data on the US labor market will be released, which is traditionally considered by investors to be one of the most important reports. The unemployment rate and the number of newly created jobs in non-agricultural sectors of the economy will clarify the situation with the recovery of the world's largest economy from the effects of the COVID-19 pandemic. Thus, we can assume with great confidence that this week will be the most important for the "British" in general and the GBP/USD pair in particular.
Monthly
As you can see, unlike the single European currency, the pound sterling did not fall against the US dollar in October but even slightly strengthened its position. Nevertheless, the long upper shadow and the closing price below the significant psychological and technical level of 1.3000 leave more questions than answers about the further direction of the quote. In the meantime, November trading began with the strengthening of the US currency. I believe that a very important role will be played by the support level of 1.2811, where the minimum values of the previous month were shown, as well as the highs of October at 1.3175. If the bears push the support at 1.2811, the pair will decline to the next level of 1.2674. If the sellers' resistance breaks through at 1.3175, the quote will move to the lower border of the monthly cloud, which passes at 1.3350. Naturally, this will not happen today or tomorrow, but most senior timeframe is still considered.
Weekly
As for the results of trading on October 26-30, the pair lost 0.66% on the decline, which is much less than the same euro. Strong resistance to growth attempts is still provided by the red Tenkan line of the Ichimoku indicator, which has already turned down and is located under the iconic mark of 1.3000 at 1.2970. In my opinion, no less strong support is in the price zone of 1.2811-1.2770, where the black 89 exponential moving average is located right at the support level, and the blue Kijun line and 50 simple moving average are located below. It can be assumed that a true Tenkan breakout will open the way up, and a break of 50 MA will send the pair to the south.
H1
Today's trading for the pound/dollar pair opened with a small bearish gap, which was almost immediately closed, after which the pair is already showing increased volatility. After all, the main events are still ahead. In the meantime, I recommend considering both options for positioning on GBP/USD, but purchases already look late, and the trend on the hourly timeframe is descending. I suggest that the main trading idea for GBP/USD should be considered sales after corrective pullbacks to the strong technical zone of 1.2900-1.2930. Opening short positions at more favorable prices can be considered after the rise in the area of 1.2955-1.2980. The graph clearly shows the technical background for such recommendations.
