The GBP/USD currency pair spent most of Wednesday consolidating rather than trending. Despite speeches by Andrew Bailey, Jerome Powell, and Christine Lagarde throughout the day, traders found little value or interest in these events. This is understandable, as central bank governors do not consistently deliver impactful statements capable of significantly influencing the market. A clear example is Christine Lagarde's recent speeches—two yesterday and five or six over the past 2.5 weeks—none of which contained groundbreaking announcements.
Similarly, Andrew Bailey refrained from sharing noteworthy information. The main takeaway from his comments was the Bank of England's readiness to cut rates by 1% in 2025, equating to four 0.25% reductions. This plan is considered the "base scenario" and has already been factored into the market's expectations. Bailey also noted that inflation has decreased more than anticipated over the past year but emphasized that the BoE is in no rush to ease monetary policy. This "base scenario" is neither positive nor negative for the British pound. It's difficult to determine whether four rate cuts are substantial or moderate. Consequently, the pound was not expected to gain any support from this information.
Turning back to yesterday, Powell also refrained from sharing significant insights. Meanwhile, second estimates of S&P services PMI indices were released but garnered no market attention. Only the ISM Services Index in the U.S. sparked some movement. With two trading days left in the week and more important reports ahead, the first three days have shown that the market lacks enthusiasm for active trading, and the pound remains unmotivated to rise—understandably, as it lacks any supporting factors.
It's worth noting that the ADP employment report is often regarded as a "younger sibling" to Non-Farm Payrolls (NFP). For November, ADP came in at 146,000 versus a forecast of 150,000—a minor deviation. As we've repeatedly highlighted, the ADP report is not critical since the market waits for NFP to gauge the U.S. labor market's health. Additionally, there is no correlation between ADP and NFP data. ADP can exceed forecasts by double, while NFP can underperform by a similar margin, with forecasts often varying significantly. For now, it's safe to say that nothing has changed in the market. This week has provided no compelling reasons to buy the euro or British pound. The technical picture remains unchanged, leaving the pound without any new momentum for growth.
The average volatility of the GBP/USD pair over the last five trading days is 79 pips, considered "average" for this currency pair. On Thursday, December 5, we expect the pair to move within the range defined by the levels 1.2631 and 1.2789. The higher linear regression channel is pointing downward, indicating a bearish trend. The CCI indicator has formed multiple bullish divergences and has entered the oversold zone several times. A correction has begun, but its strength remains difficult to predict.
Nearest Support Levels:
Nearest Resistance Levels:
- R1: 1.2695
- R2: 1.2817
- R3: 1.2939
Trading Recommendations:
The GBP/USD currency pair maintains its bearish trend. We are still not considering long positions, as we believe that the market has already priced in all growth factors for the British currency multiple times. If you trade based on "pure technical analysis," long positions may be considered with targets at 1.2789 and 1.2817, provided the price consolidates above the moving average. However, short positions remain far more relevant now, with a target of 1.2451 if the price settles below the moving average.
Explanation of Illustrations:
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.
