Overview of the GBP/USD pair. October 24th. A substantial package of macroeconomic statistics may assist the pound
October 24, 2023 11:25 am
The GBP/USD currency pair on Monday also showed a sharp and substantial rise, as we had expected. However, while the European currency has already managed to break through its recent local maximum, the British pound has not. Therefore, we are more likely to expect the continuation of the upward movement from this pair. The question is whether another round of “excellent” macroeconomic statistics from the United Kingdom will hinder this, as was the case last week. Recall that almost all reports from the UK fell short last week. Salaries increased very strongly again (although the pace of growth slowed slightly), retail sales plummeted much more than expected, and inflation did not slow down at all. All this is happening against the backdrop of the Bank of England’s diminishing “hawkish” sentiment. Thus, the British pound had little reason to rise, and it began to lag behind the euro and now must “catch up” with the EU currency.
At the same time, there are several “dangerous” differences and similarities between the euro and the pound. The first thing to note is the euro’s CCI indicator entering the overbought zone. For the pound, this indicator has only “touched” the overbought area. Of course, this does not mean that both pairs will suddenly plummet. However, it is a signal of a possible correction ending, as the trend is still downward!
The second important point is the failure to break the critical line within the 24-hour time frame. Also, the failure to overcome the Fibonacci level of 50.0% at 1.2302. Of course, this breakthrough could happen today, but as they say, “preparedness number one” should already be in traders’ minds. The correction could end at any moment, and one should be prepared for its completion. Moreover, next week, the meetings of the Federal Reserve and the Bank of England will take place, the results of which could potentially trigger a new strengthening of the dollar and a decline in the pound, as the Bank of England took a pause at the last meeting, and no one knows how long it will last.
Indices and unemployment
In the next half hour, a relatively large and the only macroeconomic statistics package for this week will be published in the United Kingdom. First, the unemployment rate and the number of unemployment benefit claims will be announced, followed by business activity indices in the service and manufacturing sectors for October. Individually, these reports are not considered super important, but taken together (especially with significant actual values), they can either support or weigh on the pound. Let’s take a closer look at these reports.
The unemployment rate is straightforward. It rarely surprises traders with unexpected values, as deviations from the forecast are usually absent or minimal. The number of unemployment benefit claims is a more volatile report. For example, today, a decrease in the number of claims by 200,000 is predicted. This means that the actual value can significantly differ from the forecast, and the market does not like such deviations. Business activity indices are unlikely to please buyers of the British pound, but their current values more likely suggest growth than a decline. Official forecasts tell us that in the manufacturing sector, an increase of 0.4 points to 44.7 is possible. In the service sector, the indicator may remain unchanged at 49.3. As we can see, exceeding the current forecasts will be relatively easy. And if the overage is at least 0.5 points, the pound may gain the necessary grounds for further growth.
In the United States today, business activity indices will also be published, which can influence the pair’s movement, but it should be remembered that there are US business activity indices (ISM), which are considered more significant. Therefore, the main focus is on business activity in the UK.
The average volatility of the GBP/USD pair over the last 5 trading days is 91 points. For the pound/dollar pair, this value is considered “average.” As a result, on Tuesday, October 24th, we anticipate movement that stays within the range defined by levels 1.2174 and 1.2356. A reversal of the Heiken Ashi indicator downward will signal the beginning of a downward correction.
Nearest support levels:
S1 – 1.2207
S2 – 1.2146
S3 – 1.2085
Nearest resistance levels:
R1 – 1.2268
R2 – 1.2329
R3 – 1.2390
Trading recommendations:
In the 4-hour timeframe, the GBP/USD pair has resumed its upward movement. Therefore, it’s possible to maintain long positions with targets at 1.2329 and 1.2390 until the price firmly drops below the moving average. In the event that the price stabilizes below the moving average, short positions with targets at 1.2146 and 1.2085 may become relevant again.
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) – determines the short-term trend and the direction in which trading should be conducted.
Murrey levels – target levels for movements and corrections.
Volatility levels (red lines) – the likely price channel in which the pair will trade over the next day, based on current volatility indicators.
CCI indicator – its entry into the overbought area (above +250) or oversold area (below -250) signals an upcoming trend reversal in the opposite direction.
The material has been provided by InstaForex Company – www.instaforex.com
The GBP/USD currency pair on Monday also showed a sharp and substantial rise, as we had expected. However, while the European currency has already managed to break through its recent local maximum, the British pound has not. Therefore, we are more likely to expect the continuation of the upward movement from this pair. The question is whether another round of “excellent” macroeconomic statistics from the United Kingdom will hinder this, as was the case last week. Recall that almost all reports from the UK fell short last week. Salaries increased very strongly again (although the pace of growth slowed slightly), retail sales plummeted much more than expected, and inflation did not slow down at all. All this is happening against the backdrop of the Bank of England’s diminishing “hawkish” sentiment. Thus, the British pound had little reason to rise, and it began to lag behind the euro and now must “catch up” with the EU currency.
At the same time, there are several “dangerous” differences and similarities between the euro and the pound. The first thing to note is the euro’s CCI indicator entering the overbought zone. For the pound, this indicator has only “touched” the overbought area. Of course, this does not mean that both pairs will suddenly plummet. However, it is a signal of a possible correction ending, as the trend is still downward!
The second important point is the failure to break the critical line within the 24-hour time frame. Also, the failure to overcome the Fibonacci level of 50.0% at 1.2302. Of course, this breakthrough could happen today, but as they say, “preparedness number one” should already be in traders’ minds. The correction could end at any moment, and one should be prepared for its completion. Moreover, next week, the meetings of the Federal Reserve and the Bank of England will take place, the results of which could potentially trigger a new strengthening of the dollar and a decline in the pound, as the Bank of England took a pause at the last meeting, and no one knows how long it will last.
Indices and unemployment
In the next half hour, a relatively large and the only macroeconomic statistics package for this week will be published in the United Kingdom. First, the unemployment rate and the number of unemployment benefit claims will be announced, followed by business activity indices in the service and manufacturing sectors for October. Individually, these reports are not considered super important, but taken together (especially with significant actual values), they can either support or weigh on the pound. Let’s take a closer look at these reports.
The unemployment rate is straightforward. It rarely surprises traders with unexpected values, as deviations from the forecast are usually absent or minimal. The number of unemployment benefit claims is a more volatile report. For example, today, a decrease in the number of claims by 200,000 is predicted. This means that the actual value can significantly differ from the forecast, and the market does not like such deviations. Business activity indices are unlikely to please buyers of the British pound, but their current values more likely suggest growth than a decline. Official forecasts tell us that in the manufacturing sector, an increase of 0.4 points to 44.7 is possible. In the service sector, the indicator may remain unchanged at 49.3. As we can see, exceeding the current forecasts will be relatively easy. And if the overage is at least 0.5 points, the pound may gain the necessary grounds for further growth.
In the United States today, business activity indices will also be published, which can influence the pair’s movement, but it should be remembered that there are US business activity indices (ISM), which are considered more significant. Therefore, the main focus is on business activity in the UK.
The average volatility of the GBP/USD pair over the last 5 trading days is 91 points. For the pound/dollar pair, this value is considered “average.” As a result, on Tuesday, October 24th, we anticipate movement that stays within the range defined by levels 1.2174 and 1.2356. A reversal of the Heiken Ashi indicator downward will signal the beginning of a downward correction.
Nearest support levels:
S1 – 1.2207
S2 – 1.2146
S3 – 1.2085
Nearest resistance levels:
R1 – 1.2268
R2 – 1.2329
R3 – 1.2390
Trading recommendations:
In the 4-hour timeframe, the GBP/USD pair has resumed its upward movement. Therefore, it’s possible to maintain long positions with targets at 1.2329 and 1.2390 until the price firmly drops below the moving average. In the event that the price stabilizes below the moving average, short positions with targets at 1.2146 and 1.2085 may become relevant again.
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) – determines the short-term trend and the direction in which trading should be conducted.
Murrey levels – target levels for movements and corrections.
Volatility levels (red lines) – the likely price channel in which the pair will trade over the next day, based on current volatility indicators.
CCI indicator – its entry into the overbought area (above +250) or oversold area (below -250) signals an upcoming trend reversal in the opposite direction.
The material has been provided by InstaForex Company – www.instaforex.com
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