Overview of the GBP/USD pair. October 11th. Is the Fed beginning to soften its “hawkish” rhetoric?
October 11, 2023 11:27 am
Strong macroeconomic or fundamental factors (strong ones for the British pound) did not start the GBP/USD currency pair’s upward correction, which continued on Tuesday. According to two linear regression channels, the pair’s downward trend is still present. However, the more significant signal was the triple entry of the CCI indicator into the oversold area, after which the upward correction simply had to begin. Therefore, we are currently witnessing a purely technical rise in the British currency. The overall decline of the pound over the past two months has been approximately 1100 points, so the correction could amount to 500–550 points. At the moment, the pair has risen by 250 points, so it can easily move up to the 25th or 26th level without strong news support.
At the same time, in the 24-hour timeframe, we have the same technical picture as with the euro. The price hit an important Fibonacci level of 50.0% at 1.2300 and the Kijun-sen line of the Ichimoku indicator. It turns out that both major currency pairs may complete their correction today if these four resistances are not overcome. We believe that the current size of the correction for the euro and the pound is insufficient, so we advocate for further upward movement. However, everything will now depend on the level of 1.0609 for the euro and 1.2300 for the pound. Since the euro and the pound often trade in a similar manner, we can expect synchronous rebounds or synchronous breakthroughs at the mentioned levels.
Macroeconomic background was practically absent in the UK and the US on Monday and Tuesday, but in the second half of the week, there will be several interesting publications that could impact market sentiment. However, we do not believe that GDP data in the UK or inflation data in the US will be able to turn the market around 180 degrees. Most likely, we will simply see a noticeable market reaction.
Raphael Bostic does not consider it necessary to continue raising the interest rate.
Raphael Bostic, the President of the Federal Reserve Bank of Atlanta and a member of the Federal Reserve’s monetary committee, was the first to make the statement that further tightening of monetary policy is not necessary. He made this statement on Tuesday, adding that inflation has significantly improved recently. He also noted that the regulator still has a long way to go to return inflation to the target level, and the US economy can still avoid a recession. Bostic believes that the current interest rate level is sufficient to bring inflation back to 2%. At the same time, if the situation differs from Mr. Bostic’s opinion, he is ready to support additional tightening of monetary policy to ensure the continued downward trajectory of inflation.
Thus, “moderately dovish” information is beginning to emerge from the Federal Reserve. If Mr. Bostic starts talking about the inadvisability of further tightening monetary policy, other officials may join his opinion. We have repeatedly mentioned that we expect an interest rate hike in November because inflation in the US is once again rising. And tomorrow we may find out that it has been accelerating for the third consecutive month. In our view, such a basis cannot fail to lead to an additional 0.25% rate hike. However, at the moment, the market almost doesn’t believe in new tightening at the next meeting. Therefore, the dollar can calmly undergo a correction.
But we would also like to note that Bostic’s opinion is just one of 18. Other Federal Reserve officials may think differently. In any case, there will be no talk of easing monetary policy in the near future, which means that the medium-term prospects for the US currency remain positive. Even if the Federal Reserve does not raise the rate in November and December, it would mean a longer period of maintaining it at its peak level. Now we are waiting for information from the Bank of England to understand what the British regulator is ready for in 2023.
The average volatility of the GBP/USD pair over the last 5 trading days is 109 points. For the pound/dollar pair, this value is considered “average.” As a result, we can anticipate movement on Tuesday, October 11th, between the levels of 1.2180 and 1.2398. A reversal of the Heiken Ashi indicator downwards will signal a possible resumption of the downward movement.
Nearest support levels:
S1 – 1.2268
S2 – 1.2207
S3 – 1.2146
Nearest resistance level:
R1 – 1.2329
Trading recommendations:
In the 4-hour timeframe, the GBP/USD pair has initiated a new phase of corrective movement. Therefore, short positions can be considered with targets at 1.2146 and 1.2085 if the price reverts back below the moving average. At present, it is advisable to remain in long positions with targets at 1.2329 and 1.2398 until a Heiken Ashi indicator reversal signals a downward trend.
Explanations for the illustrations:
Linear regression channels – help determine the current trend. If both are pointing in the same direction, it indicates a strong current trend.
Moving average line (settings 20.0, smoothed) – defines short-term trends and the direction to trade in at the moment.
Murray levels – target levels for movements and corrections.
Volatility levels (red lines) – the probable price channel in which the pair will trade in the next day, based on current volatility indicators.
CCI indicator – its entry into the oversold area (below -250) or overbought area (above +250) signifies an impending reversal of the trend in the opposite direction.
The material has been provided by InstaForex Company – www.instaforex.com
Strong macroeconomic or fundamental factors (strong ones for the British pound) did not start the GBP/USD currency pair’s upward correction, which continued on Tuesday. According to two linear regression channels, the pair’s downward trend is still present. However, the more significant signal was the triple entry of the CCI indicator into the oversold area, after which the upward correction simply had to begin. Therefore, we are currently witnessing a purely technical rise in the British currency. The overall decline of the pound over the past two months has been approximately 1100 points, so the correction could amount to 500–550 points. At the moment, the pair has risen by 250 points, so it can easily move up to the 25th or 26th level without strong news support.
At the same time, in the 24-hour timeframe, we have the same technical picture as with the euro. The price hit an important Fibonacci level of 50.0% at 1.2300 and the Kijun-sen line of the Ichimoku indicator. It turns out that both major currency pairs may complete their correction today if these four resistances are not overcome. We believe that the current size of the correction for the euro and the pound is insufficient, so we advocate for further upward movement. However, everything will now depend on the level of 1.0609 for the euro and 1.2300 for the pound. Since the euro and the pound often trade in a similar manner, we can expect synchronous rebounds or synchronous breakthroughs at the mentioned levels.
Macroeconomic background was practically absent in the UK and the US on Monday and Tuesday, but in the second half of the week, there will be several interesting publications that could impact market sentiment. However, we do not believe that GDP data in the UK or inflation data in the US will be able to turn the market around 180 degrees. Most likely, we will simply see a noticeable market reaction.
Raphael Bostic does not consider it necessary to continue raising the interest rate.
Raphael Bostic, the President of the Federal Reserve Bank of Atlanta and a member of the Federal Reserve’s monetary committee, was the first to make the statement that further tightening of monetary policy is not necessary. He made this statement on Tuesday, adding that inflation has significantly improved recently. He also noted that the regulator still has a long way to go to return inflation to the target level, and the US economy can still avoid a recession. Bostic believes that the current interest rate level is sufficient to bring inflation back to 2%. At the same time, if the situation differs from Mr. Bostic’s opinion, he is ready to support additional tightening of monetary policy to ensure the continued downward trajectory of inflation.
Thus, “moderately dovish” information is beginning to emerge from the Federal Reserve. If Mr. Bostic starts talking about the inadvisability of further tightening monetary policy, other officials may join his opinion. We have repeatedly mentioned that we expect an interest rate hike in November because inflation in the US is once again rising. And tomorrow we may find out that it has been accelerating for the third consecutive month. In our view, such a basis cannot fail to lead to an additional 0.25% rate hike. However, at the moment, the market almost doesn’t believe in new tightening at the next meeting. Therefore, the dollar can calmly undergo a correction.
But we would also like to note that Bostic’s opinion is just one of 18. Other Federal Reserve officials may think differently. In any case, there will be no talk of easing monetary policy in the near future, which means that the medium-term prospects for the US currency remain positive. Even if the Federal Reserve does not raise the rate in November and December, it would mean a longer period of maintaining it at its peak level. Now we are waiting for information from the Bank of England to understand what the British regulator is ready for in 2023.
The average volatility of the GBP/USD pair over the last 5 trading days is 109 points. For the pound/dollar pair, this value is considered “average.” As a result, we can anticipate movement on Tuesday, October 11th, between the levels of 1.2180 and 1.2398. A reversal of the Heiken Ashi indicator downwards will signal a possible resumption of the downward movement.
Nearest support levels:
S1 – 1.2268
S2 – 1.2207
S3 – 1.2146
Nearest resistance level:
R1 – 1.2329
Trading recommendations:
In the 4-hour timeframe, the GBP/USD pair has initiated a new phase of corrective movement. Therefore, short positions can be considered with targets at 1.2146 and 1.2085 if the price reverts back below the moving average. At present, it is advisable to remain in long positions with targets at 1.2329 and 1.2398 until a Heiken Ashi indicator reversal signals a downward trend.
Explanations for the illustrations:
Linear regression channels – help determine the current trend. If both are pointing in the same direction, it indicates a strong current trend.
Moving average line (settings 20.0, smoothed) – defines short-term trends and the direction to trade in at the moment.
Murray levels – target levels for movements and corrections.
Volatility levels (red lines) – the probable price channel in which the pair will trade in the next day, based on current volatility indicators.
CCI indicator – its entry into the oversold area (below -250) or overbought area (above +250) signifies an impending reversal of the trend in the opposite direction.
The material has been provided by InstaForex Company – www.instaforex.com
Related Posts: