On Wednesday morning, the GBP/USD currency pair attempted to maintain its upward trend. However, in the afternoon, it still slightly declined while maintaining its position above the moving average line. Recall that right now, we are not considering the outcomes of the Fed meeting because they make no sense. Summarizing will be necessary once the market has fully processed the meeting's outcomes and all of Jerome Powell's Wednesday night remarks. The results of the BA meeting and Andrew Bailey's speech will be made public today. Thus, such inferences will be possible on Friday at the earliest. How often does the pair move in one direction by 100–200 points after the Central Bank meeting before returning to its initial positions the following day? How should the results be interpreted in this situation? As "dovish" or as "hawk"? Therefore, we do not want to rush to conclusions.
However, drawing hasty conclusions about how the market will respond to macroeconomic statistics is unnecessary. In theory, traders should focus on just two reports to fully comprehend the current state of the foreign exchange market. Inflation in the United States and the UK declined significantly in November. British - by 0.4%, and American - by 0.6%. The market expected a gradual decrease in price growth in both the first and second cases. However, the US dollar dropped by 150 points in the first instance, and the British pound dropped by 20 points in the second. As a result, the market has once again demonstrated that, in theory, it does not care about the specifics of a given report or event. It is sticking to its plan and is intent on purchasing the pound. Although we still anticipate that the market will remain absurd for a while, we advise starting short positions once the pair has stabilized below the moving average line.
What course of action will the Bank of England take?
As previously stated, a summary of the outcomes of all three meetings will be possible on Friday. Today, predicting when and how traders will respond will be impossible. Traders can continue analyzing the outcomes of the Fed meeting during the European trading session. The outcomes of the ECB and BA meetings will be made public at noon. Moreover, each of these occurrences may indirectly impact one European currency. As a result, actions today may be completely illogical. What is BA capable of? The rate will increase by 0.5%, and the market is confident. This tightening won't be sufficient to combat inflation, but the Bank of England, unlike the ECB, has already increased the rate eight times and can do so again today, bringing it to 3.5%. So, if we anticipate a clear decline in the value of the euro in the case of the ECB, we make no assumptions whatsoever in the case of the BA. Such a decision is open to interpretation by the market. The degree to which the British regulator raises the rate will determine many factors. And only Andrew Bailey can respond to this query. Will he, however, want to do it?
As you can see, our equation contains way too many unknowns. It's impossible to find an answer because there are so many unknowns. Therefore, until Friday, when it will be possible to draw at least some conclusions, it is still best to trade solely on "technique" or not at all. The growth of the pound/dollar pair has been excessive and at least 50% unreasonable. The pound could use this time to correct since there were essentially no significant fundamental and macroeconomic events last week. The price on the 4-hour TF could not even dip below the moving average because traders needed to lock in profits on long positions. Additionally, it is situated close to where the price is.
Over the previous five trading days, the GBP/USD pair has experienced an average volatility of 121 points. This value is "high" for the dollar/pound exchange rate. As a result, on Thursday, December 15, we anticipate movement constrained by the levels of 1.2317 and 1.2557. The Heiken Ashi indicator's downward reversal again indicates that the pair is making another attempt to correct.
Nearest levels of support
S1 – 1.2390
S2 – 1.2329
S3 – 1.2268
Nearest levels of resistance
R1 – 1.2451
R2 – 1.2512
R3 – 1.2573
Trading Suggestions:
In the 4-hour timeframe, the GBP/USD pair is still moving upward. Therefore, until the Heiken Ashi indicator turns down, you should maintain buy orders with targets of 1.2512 and 1.2557. When a price is anchored below the moving average, sell orders should be placed with targets of 1.2207 and 1.2146.
Explanations for the illustrations:
Determine the present trend with the aid of linear regression channels. The trend is currently strong if they both move in the same direction.
Moving average line (settings 20.0, smoothed): This indicator identifies the current short-term trend and the trading direction.
Murray levels serve as the starting point for adjustments and movements.
Based on current volatility indicators, volatility levels (red lines) represent the likely price channel in which the pair will trade the following day.
A trend reversal in the opposite direction is imminent when the CCI indicator crosses into the overbought (above +250) or oversold (below -250) zones.