GBP/USD. August 4th. Bank of England Meeting: did anything change?
August 4, 2023 1:22 pm
On the hourly chart, the GBP/USD pair experienced a rebound from the corrective level of 76.4% (1.2720) on Thursday, leading to a shift in favor of the US dollar and a drop to nearly 1.2590. By the evening, the quotes returned to the 1.2720 level, and currently, there is a possibility of resuming the decline. The British pound continues to face bearish pressure, and yesterday’s news from the Bank of England had little impact on the overall market sentiment.
The wave patterns still indicate a “bearish” trend. The recent downward wave was quite extensive, and its low is significantly lower than the low of the previous descending wave. The recent rise of the pound can only be cautiously considered an upward wave. At present, it is premature to conclude that the “bearish” trend is coming to an end. Even if today’s US statistics turn out to be weak, and the pair shows some growth, it would need to reach the level of 1.2866 and convincingly break it to confirm a trend reversal.
The outcome of the Bank of England meeting left many traders and economists disappointed. The interest rate increased by 0.25%, as traders had anticipated. Andrew Bailey’s speech was of particular interest. However, when it concluded, traders were left with a feeling of incompleteness. Bailey provided the market with substantial information, assuring that the rate may continue to increase in 2023. Nevertheless, he also mentioned that BofE decisions would be based on economic indicators, implying that a decline in GDP might halt the rate hike. It remains unclear where inflation, which, according to Bailey, is being fueled by high wage growth, will stand by that time. Many questions remain unanswered.
On the 4-hour chart, the pair closed below the ascending trendline and the Fibonacci level of 61.8% (1.2745). As a result, the decline in quotes may extend toward the next level at 1.2485. Today’s developments will largely depend on information from the US, and we can return to chart analysis on Monday. Currently, no emerging divergences are observed in any of the indicators.
Commitments of Traders (COT) Report:
The sentiment of the “Non-commercial” trader category became less “bullish” during the last reporting week. The number of long contracts held by speculators decreased by 29,771 units, while the number of short contracts decreased by 25,037. The overall sentiment of major players remains largely “bullish,” with a twofold gap between the number of long and short contracts: 105 thousand versus 46 thousand. In my opinion, the pound still holds promising prospects for continued growth, but the information background from the UK is not consistently encouraging, and chart analysis suggests a trend reversal – bears might take the initiative. Relying on a new strong rise of the British pound is becoming increasingly challenging. The market has not yet fully factored in many factors supporting the dollar, and the recent pound surge has been largely driven by expectations of further rate hikes by the Bank of England.
News calendar for the USA and the UK:
USA – Average Hourly Earnings (12:30 UTC).
USA – Nonfarm Payrolls Change (12:30 UTC).
USA – Unemployment Rate (12:30 UTC).
Friday’s economic calendar is once again filled with important entries. Undoubtedly, all traders’ attention will be focused on the Nonfarm Payrolls report. For the remaining part of the day, the impact of the information background can be significant, just as it was yesterday.
Forecast for GBP/USD and trading advice:
I recommended selling the pound on a rebound from the 1.2866 level on the hourly chart with targets at 1.2801 and 1.2720. Both targets have been reached, and there were no buy signals. You can keep the trades open with the target at 1.2590, setting the Stop Loss above 1.2720. Buying the pound is possible if it consolidates above the 1.2720 level on the hourly chart with targets at 1.2801 and 1.2866.
The material has been provided by InstaForex Company – www.instaforex.com
On the hourly chart, the GBP/USD pair experienced a rebound from the corrective level of 76.4% (1.2720) on Thursday, leading to a shift in favor of the US dollar and a drop to nearly 1.2590. By the evening, the quotes returned to the 1.2720 level, and currently, there is a possibility of resuming the decline. The British pound continues to face bearish pressure, and yesterday’s news from the Bank of England had little impact on the overall market sentiment.
The wave patterns still indicate a “bearish” trend. The recent downward wave was quite extensive, and its low is significantly lower than the low of the previous descending wave. The recent rise of the pound can only be cautiously considered an upward wave. At present, it is premature to conclude that the “bearish” trend is coming to an end. Even if today’s US statistics turn out to be weak, and the pair shows some growth, it would need to reach the level of 1.2866 and convincingly break it to confirm a trend reversal.
The outcome of the Bank of England meeting left many traders and economists disappointed. The interest rate increased by 0.25%, as traders had anticipated. Andrew Bailey’s speech was of particular interest. However, when it concluded, traders were left with a feeling of incompleteness. Bailey provided the market with substantial information, assuring that the rate may continue to increase in 2023. Nevertheless, he also mentioned that BofE decisions would be based on economic indicators, implying that a decline in GDP might halt the rate hike. It remains unclear where inflation, which, according to Bailey, is being fueled by high wage growth, will stand by that time. Many questions remain unanswered.
On the 4-hour chart, the pair closed below the ascending trendline and the Fibonacci level of 61.8% (1.2745). As a result, the decline in quotes may extend toward the next level at 1.2485. Today’s developments will largely depend on information from the US, and we can return to chart analysis on Monday. Currently, no emerging divergences are observed in any of the indicators.
Commitments of Traders (COT) Report:
The sentiment of the “Non-commercial” trader category became less “bullish” during the last reporting week. The number of long contracts held by speculators decreased by 29,771 units, while the number of short contracts decreased by 25,037. The overall sentiment of major players remains largely “bullish,” with a twofold gap between the number of long and short contracts: 105 thousand versus 46 thousand. In my opinion, the pound still holds promising prospects for continued growth, but the information background from the UK is not consistently encouraging, and chart analysis suggests a trend reversal – bears might take the initiative. Relying on a new strong rise of the British pound is becoming increasingly challenging. The market has not yet fully factored in many factors supporting the dollar, and the recent pound surge has been largely driven by expectations of further rate hikes by the Bank of England.
News calendar for the USA and the UK:
USA – Average Hourly Earnings (12:30 UTC).
USA – Nonfarm Payrolls Change (12:30 UTC).
USA – Unemployment Rate (12:30 UTC).
Friday’s economic calendar is once again filled with important entries. Undoubtedly, all traders’ attention will be focused on the Nonfarm Payrolls report. For the remaining part of the day, the impact of the information background can be significant, just as it was yesterday.
Forecast for GBP/USD and trading advice:
I recommended selling the pound on a rebound from the 1.2866 level on the hourly chart with targets at 1.2801 and 1.2720. Both targets have been reached, and there were no buy signals. You can keep the trades open with the target at 1.2590, setting the Stop Loss above 1.2720. Buying the pound is possible if it consolidates above the 1.2720 level on the hourly chart with targets at 1.2801 and 1.2866.
The material has been provided by InstaForex Company – www.instaforex.com
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