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On Tuesday, the GBP/USD currency pair tried to correct but failed even decisively to overcome the moving average. In the article on the euro, we already explained that all indicators and technical patterns fail when the fundamental background is against them. We also mentioned that counter-trend signals are often better left ignored. To add to this discussion, we'd point out that "textbook" market movements are extremely rare. Perhaps many traders have been waiting for a correction in the current downtrend to enter short positions. However, not a single correction has occurred over the past two months. At this point, the British pound could very well resume its decline because everyone in the market is expecting a correction, and no one believes the British currency could continue falling without even retracing a couple of hundred pips upward.
The reasons for the pound's decline remain the same as they were two months ago. These include an entirely unjustified exchange rate for the GBP/USD pair and the significant overvaluation of the British currency. An unwarranted growth of the pound over at least the past year. A complete lack of macroeconomic and fundamental grounds for the pound's growth, the weak state of the British economy, and the political crisis that the UK has been unable to overcome since 2016. Additionally, there is a global downtrend that has persisted for 16 years. On what basis should we expect the pound to grow? Only on the assumption that major players will begin to take profits on short positions. But when might this happen? No indicator will predict this.
We often disregard secondary macroeconomic events that many other analysts regularly highlight. We believe that reactions to reports such as unemployment claims (for example) that move the market by 20 pips are insignificant in shaping the trend or market sentiment. If you are trading intraday, it is worth paying attention to all reports simply because they can reverse the local trend or cause the price to move against you. However, trading systems on lower timeframes (TFs) operate differently.
On higher charts, the highest timeframes, trends, and overall fundamental background matter the most. We see that the pound has been declining for 16 years, but it has been rising in the last two years — correcting. Essentially, the most rational approach would be to wait two years and resume selling. Yes, this may sound quite absurd, but we have repeatedly stated, even in 2024 alone, that the pound's growth is entirely illogical. If some traders prefer making trades without understanding the nature of the movement, we have no objections to that.
The average volatility of the GBP/USD pair over the past five trading days is 95 pips, which is considered "average" for this pair. On Wednesday, November 27, we expect movement within a range bounded by the levels 1.2440 and 1.2630. The higher linear regression channel is directed downward, indicating a bearish trend. The CCI indicator has generated numerous bullish divergences and has entered the oversold zone several times, yet no corrections have materialized.
The GBP/USD pair maintains a bearish trend. Long positions are still not considered viable because we believe the market has already factored in all potential growth drivers for the British currency several times.
If you are trading on "pure technicals," long positions are possible with targets at 1.2817 and 1.2878, but only if the price positions itself above the moving average. Short positions remain much more relevant, with targets at 1.2451 and 1.2390, as long as the price stays below the moving average.
Linear Regression Channels help determine the current trend. If both channels are aligned, it indicates a strong trend.
Moving Average Line (settings: 20,0, smoothed) defines the short-term trend and guides the trading direction.
Murray Levels act as target levels for movements and corrections.
Volatility Levels (red lines) represent the likely price range for the pair over the next 24 hours based on current volatility readings.
CCI Indicator: If it enters the oversold region (below -250) or overbought region (above +250), it signals an impending trend reversal in the opposite direction.
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