GBP/USD. November 6th. The pound rallied but is significantly overbought after Friday
November 6, 2023 12:25 pm
On the hourly chart, the GBP/USD pair continued its upward movement on Friday, consolidating above the levels of 1.2250 and 1.2336. Thus, the upward movement may continue towards the next corrective level of 127.2% (1.2440). The consolidation of quotes below the level of 1.2336 will favor the US dollar and mark the beginning of a decline towards the corrective level of 161.8% (1.2250).
The wave situation is currently very ambiguous. In recent weeks, we have seen horizontal movement with occasional bursts of trader activity, but Friday ended with a strong upward wave that broke through the peaks of all the waves in the last 2-3 months. Thus, on the one hand, a “bullish” trend is now forming, but I doubt it will develop. I think it is more likely that a “bearish” trend will form. Also, a short-term one, with the pair falling to the level of 1.2106.
On Friday, the British pound had the same information background as the euro. There are hardly any differences, and only American news was responsible for the rise of the British pound. As I have already mentioned, the unemployment rate has risen to 3.9%, the ISM business activity index has fallen to 51.8, and the Nonfarm Payrolls report showed a value of 150K, with expectations of 180K. Thus, the bulls received the necessary data to become active, but there will be no such data today. We have seen that the bulls are not ready for active action if there is no information support. And this week, there will be very little of it. I can only note the speeches of Fed President Jerome Powell and the UK GDP report for the third quarter. There are two events, each of which has extremely low chances of supporting buyers.
On the 4-hour chart, the pair consolidated above the Fibonacci level of 50.0% (1,2289), which allows us to count on further growth towards the next level of 1.2450. A rebound from this level will favor the US dollar and lead to some decline towards the correction level of 1,2289. Closing quotes above 1.2450 significantly increase the chances of continued growth towards the next level of 1.2620. No impending divergences are observed with any of the indicators, but both are in overbought territory.
Commitments of Traders (COT) Report:
The sentiment of “non-commercial” traders has become more “bearish” in the latest report. The number of long contracts held by speculators has decreased by 3407 units, while the number of short contracts has decreased by 1672 units. The overall sentiment of major players has long turned “bearish,” and the gap between the number of long and short contracts is increasing, but now in the other direction: 64,000 versus 84,000. In my opinion, the British pound still has excellent prospects to continue its decline. I still do not expect strong growth in the British pound in the near future. I believe that over time, the bulls will continue to get rid of their buy positions, just as with the European currency. The recent growth we have seen in recent weeks is a correction.
Economic Calendar for the US and the UK:
UK – Construction Sector Business Activity Index (09:30 UTC).
On Monday, the economic events calendar contained only one not very significant entry. The impact of the information background on market sentiment for the rest of the day will be very weak or absent.
GBP/USD Forecast and Trader Advice:
Selling the British pound is possible today upon consolidation below the level of 1.2336 or upon a rebound from the level of 1.2440 on the hourly chart with the nearest target. Buying is possible today, but it’s quite risky since the pound has already moved up nearly 300 points. Further growth is unlikely but still possible.
The material has been provided by InstaForex Company – www.instaforex.com
On the hourly chart, the GBP/USD pair continued its upward movement on Friday, consolidating above the levels of 1.2250 and 1.2336. Thus, the upward movement may continue towards the next corrective level of 127.2% (1.2440). The consolidation of quotes below the level of 1.2336 will favor the US dollar and mark the beginning of a decline towards the corrective level of 161.8% (1.2250).
The wave situation is currently very ambiguous. In recent weeks, we have seen horizontal movement with occasional bursts of trader activity, but Friday ended with a strong upward wave that broke through the peaks of all the waves in the last 2-3 months. Thus, on the one hand, a “bullish” trend is now forming, but I doubt it will develop. I think it is more likely that a “bearish” trend will form. Also, a short-term one, with the pair falling to the level of 1.2106.
On Friday, the British pound had the same information background as the euro. There are hardly any differences, and only American news was responsible for the rise of the British pound. As I have already mentioned, the unemployment rate has risen to 3.9%, the ISM business activity index has fallen to 51.8, and the Nonfarm Payrolls report showed a value of 150K, with expectations of 180K. Thus, the bulls received the necessary data to become active, but there will be no such data today. We have seen that the bulls are not ready for active action if there is no information support. And this week, there will be very little of it. I can only note the speeches of Fed President Jerome Powell and the UK GDP report for the third quarter. There are two events, each of which has extremely low chances of supporting buyers.
On the 4-hour chart, the pair consolidated above the Fibonacci level of 50.0% (1,2289), which allows us to count on further growth towards the next level of 1.2450. A rebound from this level will favor the US dollar and lead to some decline towards the correction level of 1,2289. Closing quotes above 1.2450 significantly increase the chances of continued growth towards the next level of 1.2620. No impending divergences are observed with any of the indicators, but both are in overbought territory.
Commitments of Traders (COT) Report:
The sentiment of “non-commercial” traders has become more “bearish” in the latest report. The number of long contracts held by speculators has decreased by 3407 units, while the number of short contracts has decreased by 1672 units. The overall sentiment of major players has long turned “bearish,” and the gap between the number of long and short contracts is increasing, but now in the other direction: 64,000 versus 84,000. In my opinion, the British pound still has excellent prospects to continue its decline. I still do not expect strong growth in the British pound in the near future. I believe that over time, the bulls will continue to get rid of their buy positions, just as with the European currency. The recent growth we have seen in recent weeks is a correction.
Economic Calendar for the US and the UK:
UK – Construction Sector Business Activity Index (09:30 UTC).
On Monday, the economic events calendar contained only one not very significant entry. The impact of the information background on market sentiment for the rest of the day will be very weak or absent.
GBP/USD Forecast and Trader Advice:
Selling the British pound is possible today upon consolidation below the level of 1.2336 or upon a rebound from the level of 1.2440 on the hourly chart with the nearest target. Buying is possible today, but it’s quite risky since the pound has already moved up nearly 300 points. Further growth is unlikely but still possible.
The material has been provided by InstaForex Company – www.instaforex.com
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