On Monday, the GBP/USD currency pair quietly, peacefully, and calmly continued their movement to the north. Is it worth mentioning again that there were no grounds for the pound's new strengthening yesterday? Furthermore, observing a sluggish rise in the pair could be attributed to ordinary "market noise" since no instrument can stand still without foundation and statistics. However, the pound is rising quite sharply and almost every day. If last week there was no report on British inflation, which dropped by 2.1% in just one month, we wouldn't have seen any downward corrections. Therefore, the market is buying the pair groundlessly, as regrettable as it is.
In the article on EUR/USD, we have already considered all the most important factors and the absolute majority of them speak in favor of the strengthening of the dollar, not its decline. We only allow for the possibility that the correction will take on a larger scale, and the market will use it to later sell at a more favorable price. We do not believe in the resumption of the long-term upward trend. In addition, the CCI indicator has also entered the overbought zone three times already. This is a strong signal of a possible trend reversal. Thus, the current situation is as follows. The pair is growing, positioned above the moving average, so there is no reason to sell it now. At the same time, almost all factors indicate a trend reversal downwards. If the CCI indicator enters the overbought zone for the fourth time in a row, it will be a new record.
Separately, it is worth noting the volatility indicator. Currently, its average value is 116 points. However, this high value was provided only by one day last week when the pair rose by 250 points. Tomorrow, this indicator will plummet. Also, note that in the last 11 trading days, volatility exceeded 95 points only once. This means the price moves calmly overall, with no bursts of emotions and active trading.
Bailey did not report anything important, but it was not required.
Yesterday, Bank of England Governor Andrew Bailey made another speech. It was so interesting that, at the moment, there is no information about the content of the speech. Most likely, Mr. Bailey ignored important inflation and monetary policy topics, or his statements completely repeated his past speeches. The market is unlikely to react to the same theses.
In any case, what can the head of the Bank of England tell the market now? Inflation for October fell to 4.6%, which is already higher than Bailey predicted. It turns out that his forecast was correct, although we did not believe in it. Therefore, if the Bank of England's monetary policy committee considered additional tightening, there is no longer any need. Consequently, the rhetoric of the British regulator's representatives can only soften. And the softening of "hawkish" rhetoric is a factor in the decline of the British currency. But the pound is growing, from which we conclude that Bailey's speech did not become the reason for the pound's rise again.
The general conclusion is as follows: theoretically, the pound can continue to rise as much as it wants because the market is guided not only by the principle of making a profit. Many major players buy a particular currency for their purposes and tasks, not because there is currently a favorable technical picture. Therefore, as long as the upward trend continues, short positions should not be opened naturally. But at the same time, it is worth keeping in mind that almost all factors speak in favor of the resumption of the medium-term downward trend. Thus, such an option is possible. We still need to abandon the target of 1.1840.
The average GBP/USD pair volatility for the last five trading days as of November 21 is 116 points. For the pound/dollar pair, this value is considered "high." On Tuesday, November 21, we expect movement within the range limited by the levels of 1.2414 and 1.2646. A downward reversal of the Heiken Ashi indicator will indicate a new phase of the downward correction.
Nearest support levels:
S1 - 1.2512
S2 - 1.2451
S3 - 1.2390
Nearest resistance levels:
R1 - 1.2573
R2 - 1.2634
R3 - 1.2695
Trading recommendations:
The GBP/USD currency pair continues its new downward movement phase and is above the moving average line. Short positions can be opened with targets at 1.2329 and 1.2268 if the price consolidates below the moving average. Long positions can formally be considered since the price is above the moving average, with targets at 1.2573 and 1.2634. Still, the triple overbought condition of the CCI indicator indicates the danger of opening such deals.
Explanations for the illustrations:
Linear regression channels - help determine the current trend. If both are directed in the same direction, the trend is strong.
The moving average line (settings 20.0, smoothed) - determines the short-term trend and the direction in which it is currently advisable to trade.
Murray levels - target levels for movements and corrections.
Volatility levels (red lines) - the probable price channel in which the pair will spend the next day, based on current volatility indicators.
CCI indicator - its entry into the oversold zone (below -250) or overbought zone (above +250) indicates that a trend reversal in the opposite direction is approaching.