FX.co ★ Technical analysis of GBP/USD on November 25. COT report. Fed can accelerate stimulus cuts

GBP/USD – 1H.

On the hourly chart, GBP/USD continued to fall on Wednesday towards the corrective level of 127.2% or 1.3296. It is still going on today. A new downtrend corridor has also formed, which again characterizes the traders' mood as bearish. The pair's rebound from 1.3296 would be in favour of the British currency and some upside towards the 100.0% level or 1.3411. A close under 127.2% would increase the chances of a further fall towards 1.3150, the next Fibonacci level of 161.8%. In addition to the important data, the minutes of the November Fed meeting were also published in the USA yesterday. This document showed that some committee members are willing to vote to accelerate the pace of the asset purchase programme cuts so that this would lead to earlier completion of the entire QE programme. The minutes also stated that the withdrawal of stimulus was not a signal for a rate hike. For this, more compelling reasons are required.

At the same time, some Fed members argued that the regulator should be prepared for an earlier rate hike if inflation continued to remain high. Fed members suggest that inflation could slow down for much longer than previously expected. FOMC members noted that economic growth had slowed in the third quarter and the labour market recovery had been slower. Economic activity is also down compared to the first two quarters of 2021. Although the assessment of the current state of economic conditions is weak, the fact that some FOMC members are willing to move to a faster pace of asset purchase cuts and earlier rate hikes means that the dollar may continue to show gains as this is hawkish rhetoric. Thus, the pound has not waited for a positive information backdrop. Today's possible close above the downward corridor and a speech by Bank of England Governor Andrew Bailey give hope.

GBP/USD – 4H.

On the 4-hour chart, the GBP continues its decline towards 1.3274, the next Fibonacci level of 61.8%. A new bullish divergence in the MACD indicator allows expecting a reversal in favour of the British currency and some growth towards the 50.0% retracement level of 1.3457. However, a close below its current low would cancel it. A pullback of the quotes from 1.3274 may also allow for some growth in the pair. A consolidation below 1.3274 would increase the chances of further declines.

Economic calendar for US and UK

UK - Speech of Andrew Bailey, Governor of Bank of England (17-00 UTC).

There are no important events on the US economic calendar on Thursday. In the UK, only Andrew Bailey's speech will take place. Therefore, the information backdrop will be weak today.

COT(Commitments of traders):

The recent COT report on GBP/USD from November 16 shows that large market players are turning more bearish. On the reported week, speculators closed 3,990 long contracts and opened 16,809 short contracts. Notably, the number of short contracts has been strongly increasing for the second week in a row. All in all, speculators opened almost 40,000 short contracts for two weeks. In other words, half of the newly opened contracts are short ones. A week ago, the number of long contracts was 17,000 more. Nevertheless, speculators are hesitant to express clear market sentiment. They increase buy positions and then suddenly increase sell contracts, but the total number of long and short contracts for all categories of traders remain roughly the same: 206K – 198K. Hence, after a few weeks of active selling GBP/USD, speculators may rush opening long positions.

Outlook for GBP/USD and trading tips

I would recommend selling GBP/USD if the pair closes below 1.3411 with the target at 1.3296. Alternatively, buy positions are recommended if the price closes above 1,3411 at the daily chart with the target at 1.3511.

Terms

The Non-commercial category includes major market players: banks, hedge funds, investment funds, private, and large investors.

The Commercial category embraces commercial enterprises, firms, banks, corporations, companies that buy currency not to obtain speculative profit, but to ensure current activities or export-import operations.

The category of Non-reportable positions means retail traders who do not have a significant impact on the price.