The GBP/USD currency pair showed the same 200-point growth on Friday as the EUR/USD pair. The only difference is that at the end of the day and week, it remained below the moving average line, so it retains the chances of resuming the downward movement. However, this difference will not last long. Generally, the euro and the pound continue to trade almost the same, so the status quo should be restored. We also believe that the market reaction to the Bank of England meeting on Thursday and the non-farm on Friday was illogical, which means the market can use the beginning of a new week to restore justice. Recall that BA raised the key rate by 0.75% for the first time in 13 years, and this was the eighth rate increase in a row. And the pound sterling dropped in this most "hawkish" event. But on Friday, when everyone expected further growth of the dollar, as the number of jobs created outside the US agricultural sector exceeded all forecasts, there was a reverse movement of 200 points.
The pound generally retains certain upward prospects, but now the euro's position remains very shaky. It was impossible to confidently overcome the Senkou Span B line on the 24-hour TF. On the 4-hour TF, the pair is constantly rolling down. The foundation remains not that bad for the pound and remains the same as it was six months ago. That is, nothing has changed for the pound. If it used to fall with such a "foundation," why should it grow now if there are even a few technical grounds for this? Of course, growth is possible. The market may have already taken into account all possible Fed rate hikes. Perhaps the market expects that the geopolitical situation will not worsen. Perhaps he believes the worst is over, and the energy crisis will not be as terrible as it is painted. Maybe the market is already set up to buy the pound. Maybe he thinks that Rishi Sunak will lift the economy from its knees. However, we cannot make forecasts based on what the market might think. We rely on facts, and not many indicate favor for the growth of the British currency.
British GDP will lose 0.5% in the third quarter, and this is just the beginning.
This week, there will be a few macroeconomic statistics and important fundamental events in the UK. All the most interesting things are scheduled for Friday. But even there, there will be only one really important report. According to experts, GDP in the third quarter should decline by 0.4–0.5%, as the chairman of the Bank of England, Andrew Bailey, said last week. We cannot conclude that this report will bring the pound down (as practice shows, the market does not react too zealously to GDP data).
Nevertheless, this is another "stone in the garden" of the pound sterling. Bailey said the third quarter would start a prolonged recession if the Bank of England continued to tighten monetary policy. At the same time, it remains unclear whether the Bank of England will continue to tighten monetary policy. Judging by the fact that the growth rate is only increasing, yes. In this case, the British economy will continue to shrink, although who can be surprised by this factor now?
The beginning of the current week may take place in powerful movements that will not correspond to the "foundation" and macroeconomics. There will be no data in the States or the UK in the first few days. Nevertheless, the market may continue to trade very volatile, as the end of last week was full of important events, to which, from our point of view, it reacted illogically. On Monday, the pound will likely consolidate above the moving average, or the euro will return under the moving average. Also note that the first option is preferable since the CCI indicator has entered the oversold area, which is often a harbinger of a strong movement. In this case, up. Well, let's see.
The average volatility of the GBP/USD pair over the last five trading days is 194 points. For the pound/dollar pair, this value is "high." On Monday, November 7, thus, we expect movement inside the channel, limited by the levels of 1.1184 and 1.1572. The reversal of the Heiken Ashi indicator downwards signals a new round of downward movement.
Nearest support levels:
S1 – 1.1353
S2 – 1.1230
S3 – 1.1108
Nearest resistance levels:
R1 – 1.1475
R2 – 1.1597
R3 – 1.1719
Trading Recommendations:
The GBP/USD pair remains below the moving average in the 4-hour timeframe. Therefore, at the moment, new sell orders with targets of 1.1230 and 1.1184 should be considered in the event of a price rebound from the moving average. Buy orders should be opened when fixing above the moving average with targets of 1.1475 and 1.1572.
Explanations of the illustrations:
Linear regression channels – help determine the current trend. The trend is strong if both are directed in the same direction.
The moving average line (settings 20.0, smoothed) – determines the short-term trend and the direction in which trading should be conducted now.
Murray levels are target levels for movements and corrections.
Volatility levels (red lines) are the likely price channel in which the pair will spend the next day, based on current volatility indicators.
The CCI indicator – its entry into the oversold area (below -250) or into the overbought area (above +250) means that a trend reversal in the opposite direction is approaching.