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On Tuesday, the GBP/USD currency pair also traded very calmly up until the release of American inflation data. The euro/dollar article covered everything we wanted to say about this report. Thus, we won't say it again. The market violently responded to the American report while ignoring the British statistics from the previous two days. Additionally, there was something to focus on. As an illustration, the unemployment rate, which was released yesterday and increased slightly to 3.7%. Although wages have also increased, the actual values in these reports generally tracked predictions. That may explain why there was no response from them. A similar picture was seen on Monday when statistics on the gross domestic product and industrial production were released. The market most likely ignored these reports because they were almost exactly in line with forecasts, not because they were unimportant.
What do we have for the Bank of England and Fed meetings? The upward trend continues. The pair moved perfectly logically yesterday, but there are still concerns about the validity of the last three or four weeks. Although the dollar is greatly oversold and the pound is greatly overbought, the market indicated last week that it did not want to open short positions. Additionally, since there were hardly any significant macroeconomic statistics or events, the time for correction was favorable. Both linear regression channels point upward, and the pair is still located above the moving average. The price is above all the Ichimoku indicator's lines on the 24-hour TF. Therefore, there was no justification for starting sales, and there isn't.
What about the inflation rate in Britain?
A UK inflation report will be released today in addition to the Fed meeting, the results of which will be announced tonight. This report is less significant than the one on American inflation, but you still need to pay attention to it. It follows roughly the same logic. The probability that the pound will decline increases as British inflation declines. However, only some things are as clear-cut when it comes to British inflation and the Bank of England. The Fed has every reason to slow down the pace of tightening monetary policy, given that the consumer price index has been falling in the United States for five consecutive months. However, in Britain, inflation has never dropped and will start to do so at the end of November. According to official predictions, this number could drop to 10.9–11%. 11.1% is the current inflation rate. As we can see, even if there is a slowdown, it will probably be very slight.
One slowdown does not indicate a downward trend. Especially when we are talking about a slowdown of 0.1-0.2%, it may just be a simple accident. Therefore, BA's attitude shouldn't change. However, at this time, the BA rate has the most questions.
However, the BA can reduce the rate of monetary policy tightening to 0.5% once every six weeks. However, if the Fed is acting in this manner against a backdrop of a five-month decline in inflation, then the BA is acting in this manner against a backdrop of no slowdown in price growth. As a result, predicting how the market will react to the potential slowdown in British inflation is extremely challenging. Simplest scenario: a decline in the value of the British pound and inflation of more than 0.2%. However, in reality, such a reduction might not change anything regarding the "rigidity" of BA's monetary strategy. The British regulator will need to keep raising the rate for a long time because inflation will continue to be very high. The situation is now quite straightforward. It would be best if you bought since there are no concerns or doubts raised by the upward trend, and keep in mind that the pound needs to adjust badly. But only after breaking through the moving average line will it be possible to think about starting short positions.
Over the previous five trading days, the GBP/USD pair has experienced an average volatility of 124 points. This value is "high" for the dollar/pound exchange rate. As a result, on Wednesday, December 14, we anticipate movement constrained by the levels of 1.2243 and 1.2492. The Heiken Ashi indicator's downward reversal again indicates that the pair is making another attempt to correct.
Nearest levels of support
S1 – 1.2329
S2 – 1.2268
S3 – 1.2207
Nearest levels of resistance
R1 – 1.2390
R2 – 1.2451
R3 – 1.2512
Trading Suggestions:
In the 4-hour timeframe, the GBP/USD pair is still moving upward. Therefore, until the Heiken Ashi indicator turns down, you should maintain buy orders with targets of 1.2451 and 1.2492. With targets of 1.2146 and 1.2085, open sell orders should be fixed below the moving average.
Explanations for the illustrations:
Channels for linear regression help identify the current trend. The trend is currently strong if they both move in the same direction.
Moving average line (settings 20.0, smoothed): This indicator identifies the current short-term trend and the trading direction.
Murray levels serve as the starting point for adjustments and movements.
Based on current volatility indicators, volatility levels (red lines) represent the likely price channel in which the pair will trade the following day.
A trend reversal in the opposite direction is imminent when the CCI indicator crosses into the overbought (above +250) or oversold (below -250) zones.
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