FX.co ★ Technical analysis of GBP/USD for December 1, 2021

GBP/USD – H1

Hello, dear traders! According to the hourly chart, the GBP/USD pair, as well as EUR/USD, was extremely volatile on Tuesday. The currency pairs moved almost in sync. Today, the quote could close below the 127.2% retracement level (1.3296). The price failed to test important levels amid high volatility yesterday. In case of consolidation below the 127.2% retracement level, the pair is likely to go down to the 161.8% retracement level (1.3150). At the same time, traders have not recovered from yesterday's shock yet. Therefore, reversals and high activity are expected today. After Jerome Powell's speech, a further rise in the greenback is now questioned. Bulls have desperately tried to stop the downtrend for several days. However, amid the possibility of further monetary policy tightening, the greenback could rise again.

The release of Nonfarm Payrolls is scheduled for Friday. In the light of recent events, the outcome of the report will be of utmost importance. If the reading turns out to be relatively high and indicates a continuing jobs market recovery, the Federal Reserve may well announce the reduction of the quantitative easing (QE) program to $30 billion per month. In case of disappointing results, the US regulator could face a dilemma. On the one hand, to curb inflation growth, monetary policy tightening is needed. On the other hand, to stimulate the recovery of the jobs market, the Fed needs to continue the QE program. The other day, Jerome Powell said that the new Omicron variant could harm business and economic activity, cause supply chain issues, boost inflation, and hinder jobs market recovery. Under such conditions, the Federal Reserve would not risk speeding up QE taper.

GBP/USD – 4H

Based on the 4-hour chart, the pair has failed to close neither below the 61.8% retracement level (1.3274) nor above the descending trend corridor that reflects bearish market sentiment. In other words, if the quote closes above the corridor, the price is likely to head towards the 50.0% retracement level (1.3457). Consolidation below 1.3274 could increase the likelihood of a fall to the 76.4% Fibonacci level (1.3044).

Macroeconomic calendar

United Kingdom:

Manufacturing PMI (09-30 UTC).

Governor Andrew Bailey speaks (14-00 UTC).

United States:

ADP Employment Change (13-15 UTC)

ISM Manufacturing PMI (15-00 UTC)

Chair Jerome Powell speaks (15-00 UTC)

Treasury Secretary Janet Yellen speaks (15-00 UTC)

On Wednesday, the BoE's Governor Andrew Bailey, the Fed's Chair Jerome Powell, and US Treasury Secretary Janet Yellen will deliver speeches.

COT (Commitments of Traders) report:

The latest COT report as of November 23 logged an increase in bearish sentiment in the group of non-commercial traders. This trend has been observed in the market for the fourth consecutive week. Speculators closed 1,288 long positions and opened 3,043 short positions during the reporting week. Overall, speculators opened about 50,000 short positions in the previous month. The same number of long positions is now held open by speculators. Thus, market sentiment is turning bearish, indicating the possibility of a fall in the pound sterling. Chart analysis also signals the likelihood of a downtrend. The total number of open long positions almost equals the number of short ones.

Outlook for GBP/USD:

Amid the possibility of a downtrend, traders should refrain from entering long positions. Short positions could be opened after the price closes below 13296, with the target seen at 1.350. Today, GBP/USD should be traded cautiously.

TERMS:

• Non-commercial traders are major market players: banks, hedge funds, investment funds, as well as private and large investors.
• Commercial traders are commercial enterprises, firms, banks, corporations, and companies that buy currency not to obtain speculative profit, but to ensure current activities or export-import operations.
• Non-reportable positions are small traders who do not have a significant impact on the price.