The GBP/USD currency pair attempted to recover on Thursday, experiencing slight growth. However, this increase was so weak and insignificant that it cannot even be classified as a correction. Apart from a late-evening speech by the Bank of England Governor, Andrew Bailey, there were no significant events in the UK during the day. Meanwhile, the US released two secondary reports: the Producer Price Index, which showed neutral results, and the Jobless Claims report, which was close to market expectations. Neither of these reports had the potential to trigger even minor dollar depreciation.
The pair's upward movement on Thursday was likely a technical correction. No financial instrument or currency pair can move continuously in one direction without pullbacks or corrections. What we observed on Thursday was merely a minor retracement. The global fundamental backdrop remains unchanged, and we still see no reason to expect significant growth in the British pound. Even the macroeconomic background is currently of minimal relevance. The pound might rise to the moving average line, but this is unlikely to signal the end of the local downtrend, which is most likely part of the long-term 16-year downtrend.
The coming days are unlikely to bring any groundbreaking macroeconomic or fundamental developments. The recent BoE and Federal Reserve meetings provided clear outcomes, with the market having long priced in the Fed's monetary easing cycle. The pace at which the Fed cuts rates no longer matters much because the market has already adjusted for the entire easing cycle. Lower-than-expected rate cuts now increase the likelihood of further and faster dollar strengthening. Fed Chair Jerome Powell indicated that the Fed could pause in December. His remarks came before the October inflation report, and the report's results have made a December pause even more probable. After two years of dollar depreciation, the currency has ample reasons for a sustained and strong recovery.
The British pound, on the other hand, lacks any compelling counterarguments. The UK economy remains weak, and although the BoE is not rushing to ease policy, it will eventually cut rates, gradually or rapidly. Market dynamics may have already priced in only the first two rate cuts. As Bailey suggested, even if inflation in the UK rises, this won't change much. The pound may decline more slowly than it otherwise might have. If the previous trend lasted two years, the current trend could hypothetically last a similarly extended period. As of now, only a month and a half has passed since its presumed start.
The average volatility for GBP/USD over the past five trading days is 109 points, classified as "high." On Friday, November 15, we expect the pair to move within the range of 1.2584–1.2802. The higher linear regression channel has turned downward, indicating a bearish trend. The CCI indicator formed a bullish divergence, but the pullback has already occurred, and the price is falling again.
Key Support Levels:
- S1: 1.2634
- S2: 1.2573
Key Resistance Levels:
- R1: 1.2695
- R2: 1.2756
- R3: 1.2817
Trading Recommendations:
The GBP/USD pair maintains its bearish trend. Long positions remain unfavorable, as the market has already priced in all factors supporting the British pound several times. For those trading on pure technical setups, long positions could be considered with targets at 1.3000 and 1.3062 if the price moves above the moving average line. However, short positions are more relevant now, with targets at 1.2584 and 1.2573, as long as the price remains below the moving average.
Explanation of Illustrations:
Linear Regression Channels help determine the current trend. If both channels are aligned, it indicates a strong trend.
Moving Average Line (settings: 20,0, smoothed) defines the short-term trend and guides the trading direction.
Murray Levels act as target levels for movements and corrections.
Volatility Levels (red lines) represent the likely price range for the pair over the next 24 hours based on current volatility readings.
CCI Indicator: If it enters the oversold region (below -250) or overbought region (above +250), it signals an impending trend reversal in the opposite direction.
