GBP/USD. November 7th. Thomas Barkin, Federal Reserve: The next rate decision will be challenging
November 7, 2023 12:23 pm
On the hourly chart, the GBP/USD pair reversed in favor of the US dollar on Monday, returning to the corrective level of 23.6% (1.2321). A bounce from this level will favor the European currency and a resumption of growth towards the Fibonacci level of 38.2% (1.2477). If the pair’s rate solidifies below the 1.2321 level, traders can expect further declines towards levels 1.2250 and 1.2175.
The wave situation is quite ambiguous at the moment. In recent weeks, we’ve observed horizontal movement with rare bursts of trader activity, but Friday ended with the formation of a strong upward wave, breaking through the peaks of all 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’s more likely to form a new “bearish” trend, albeit a short-term one, with the pair falling to the 1.2106 level.
On Monday and Tuesday, the event and report calendars in the US and the UK are empty. Therefore, we must turn to less significant events and try to determine their impact on the pair in the near future. On Friday, one of the FOMC members, Thomas Barkin, stated that the labor market report should be seen as positive rather than negative, as pressure is easing and the labor market is becoming more balanced. It’s worth noting that the Federal Reserve sees a weakening labor market as one of the main reasons to reduce inflation. If there is a shortage of workers in the labor market, wages rise, stimulating spending and inflation. Barkin also mentioned that the next rate decision could be challenging, and the regulator needs the November and December reports to make an informed decision. “I don’t know if we’ll stay at the current rate, but I’m also not sure that +0.25% is the solution to the problem,” says the head of the Federal Reserve Bank of Richmond.
On the 4-hour chart, the pair consolidated above the Fibonacci level of 50.0% (1.2289) but reversed in favor of the US dollar on Monday and is now moving back to 1.2289. A bounce from this level will allow traders to expect new growth towards the 1.2450 level. A solidification below 1.2289 increases the likelihood of a new decline of the British pound towards the 1.2035 level. No imminent divergences are observed in any of the indicators.
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 decreased by 3,407 units, and the number of short contracts decreased by 1,672 units. The overall sentiment of large players has changed to a “bearish” one for a while, and the gap between the number of long and short contracts is widening but in the opposite direction: 64,000 versus 84,000. In my opinion, there are excellent prospects for the British pound to continue to decline. I still do not expect a significant rise in the pound’s value in the near future. I believe that over time, the bulls will continue to get rid of buy positions, just as they have done with the euro. The recent rise we have seen in recent weeks is a correction.
News Calendar for the US and the UK:
On Tuesday, the economic event calendar does not contain any significant entries. The impact of the information background on market sentiment for the remainder of the day will be absent.
Forecast for GBP/USD and trader recommendations:
Sales of the British pound are possible today upon consolidation below the 1.2321 level on the hourly chart or on a bounce from the 1.2450 level on the 4-hour chart, with targets set at the nearest level. Buying today is somewhat risky, but in the case of a bounce from the 1.2321 level, buying with a target at 1.2450 can be considered.
The material has been provided by InstaForex Company – www.instaforex.com
On the hourly chart, the GBP/USD pair reversed in favor of the US dollar on Monday, returning to the corrective level of 23.6% (1.2321). A bounce from this level will favor the European currency and a resumption of growth towards the Fibonacci level of 38.2% (1.2477). If the pair’s rate solidifies below the 1.2321 level, traders can expect further declines towards levels 1.2250 and 1.2175.
The wave situation is quite ambiguous at the moment. In recent weeks, we’ve observed horizontal movement with rare bursts of trader activity, but Friday ended with the formation of a strong upward wave, breaking through the peaks of all 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’s more likely to form a new “bearish” trend, albeit a short-term one, with the pair falling to the 1.2106 level.
On Monday and Tuesday, the event and report calendars in the US and the UK are empty. Therefore, we must turn to less significant events and try to determine their impact on the pair in the near future. On Friday, one of the FOMC members, Thomas Barkin, stated that the labor market report should be seen as positive rather than negative, as pressure is easing and the labor market is becoming more balanced. It’s worth noting that the Federal Reserve sees a weakening labor market as one of the main reasons to reduce inflation. If there is a shortage of workers in the labor market, wages rise, stimulating spending and inflation. Barkin also mentioned that the next rate decision could be challenging, and the regulator needs the November and December reports to make an informed decision. “I don’t know if we’ll stay at the current rate, but I’m also not sure that +0.25% is the solution to the problem,” says the head of the Federal Reserve Bank of Richmond.
On the 4-hour chart, the pair consolidated above the Fibonacci level of 50.0% (1.2289) but reversed in favor of the US dollar on Monday and is now moving back to 1.2289. A bounce from this level will allow traders to expect new growth towards the 1.2450 level. A solidification below 1.2289 increases the likelihood of a new decline of the British pound towards the 1.2035 level. No imminent divergences are observed in any of the indicators.
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 decreased by 3,407 units, and the number of short contracts decreased by 1,672 units. The overall sentiment of large players has changed to a “bearish” one for a while, and the gap between the number of long and short contracts is widening but in the opposite direction: 64,000 versus 84,000. In my opinion, there are excellent prospects for the British pound to continue to decline. I still do not expect a significant rise in the pound’s value in the near future. I believe that over time, the bulls will continue to get rid of buy positions, just as they have done with the euro. The recent rise we have seen in recent weeks is a correction.
News Calendar for the US and the UK:
On Tuesday, the economic event calendar does not contain any significant entries. The impact of the information background on market sentiment for the remainder of the day will be absent.
Forecast for GBP/USD and trader recommendations:
Sales of the British pound are possible today upon consolidation below the 1.2321 level on the hourly chart or on a bounce from the 1.2450 level on the 4-hour chart, with targets set at the nearest level. Buying today is somewhat risky, but in the case of a bounce from the 1.2321 level, buying with a target at 1.2450 can be considered.
The material has been provided by InstaForex Company – www.instaforex.com
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