The GBP/USD currency pair traded in the same mode on Wednesday. If you carefully examine the 4-hour timeframe, it's evident that the pair has been forming a "narrowing triangle" in recent months. The lower boundary is the range of 1.2054–1.2085, and the upper boundary is the descending trendline. The pair's trading range is gradually narrowing, suggesting an impending "move" of the pound in one direction. We don't want to speculate on which direction the price will move this week. In just a few hours, the Bank of England will announce the results of its penultimate meeting of the year, and the price could move in any direction. Tomorrow, in the United States, nonfarm payrolls and unemployment reports will be released, and the price could make a significant move in either direction. We believe that even if the Bank of England takes a hawkish stance today to the extent possible and the U.S. statistics don't disappoint tomorrow, fantastic prospects for the pound won't open up. It may show a local rise, but then it will return to square one.
There were no interesting or significant reports in the UK yesterday. In the U.S., three interesting reports were released, which helped the pound grow slightly. But what does this growth depend on? The price has once again settled above the moving average, which doesn't mean much. The overall volatility was 81 points, which is quite low for the pound. In the 24-hour timeframe, the technical picture hasn't changed for several weeks, and there are no signs of a correction starting. Therefore, the recent movements we've been observing are market noise.
Naturally, trading in such conditions is very challenging. Even yesterday, when there was the Federal Reserve meeting, Powell's speech, and important reports, the pair didn't show much desire to move actively. It's quite possible that we may see something similar today. So far, this eventful week in terms of the events calendar has shown nothing of great interest.
Everything will depend on Andrew Bailey. As mentioned, in just a few hours, we will officially learn what is already clear. The Bank of England will leave the key rate unchanged, so all attention will be focused on two other events. The first is the vote of the Monetary Policy Committee on the rate. At the previous meeting, five directors supported keeping the rate unchanged, while four voted for an increase. According to forecasts, the vote today will be as follows: six in favor of keeping, three in favor of an increase. However, any deviation in either direction, even by one vote, could provoke a market reaction. If traders perceive that at least four officials are staunchly in favor of further tightening, they will believe that the rate could be raised in the future. This is unlikely to bring much joy to the pound, but a local rise is possible.
The second event is the speech by Andrew Bailey. It can be stated immediately that if the tone and content of Bailey's statements are similar to Powell's yesterday evening, we should not expect a strong market reaction. Undoubtedly, there will be some emotional response, but it will not affect the technical picture or allow any conclusions to be drawn. Therefore, if there are no surprises in the voting or Bailey's speech, we will see the same reaction as yesterday evening.
Additionally, it can be noted that the likelihood of resonant decisions and unexpected statements is quite low. Representatives of the Bank of England have already stated that they should keep the rate at the maximum level for as long as possible, which means they are not inclined to raise the rate. Therefore, we believe that today the most banal and mundane scenario will be realized.
The average volatility of the GBP/USD pair over the last 5 trading days as of November 2 is 73 points. For the pound/dollar pair, this value is considered "average." Therefore, on Thursday, November 2, we expect movement within the range limited by the levels 1.2107 and 1.2253. A reversal of the Heiken Ashi indicator downward will signal a new attempt to resume the medium-term trend.
Nearest support levels:
S1 – 1.2146
S2 – 1.2115
S3 – 1.2085
Nearest resistance levels:
R1 – 1.2177
R2 – 1.2207
R3 – 1.2238
Trading recommendations:
In the 4-hour timeframe, the GBP/USD pair continues to make sluggish attempts to correct. However, the current movement appears to be a simple flat with relatively low volatility. Therefore, we recommend waiting for the situation and technical picture to clarify before re-entering the market.
Explanations for the illustrations:
Linear regression channels – help determine the current trend. If both are pointing in the same direction, it indicates a strong trend at the moment.
Moving average line (settings 20.0, smoothed) – determines the short-term trend and the direction in which trading should be conducted.
Murray 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 oversold territory (below -250) or the overbought territory (above +250) indicates an approaching trend reversal in the opposite direction.
