empty
20.11.2024 03:22 AM
Overview of GBP/USD Pair on November 20: The Pound Sterling in a Downward Spiral

This image is no longer relevant

On Monday, the GBP/USD pair hit a new local low; on Tuesday, little movement or meaningful correction was observed. The inability of the pound sterling to even correct highlights a significant issue: a lack of buyers in the market. This raises the question: why are buyers absent? From our perspective, the pound remains excessively overbought and unjustifiably expensive. This imbalance will likely sustain downward pressure on the currency for some time. If the pound rallied for nearly two years without solid justification, how much further can it fall when multiple factors support the case for its decline?

It's important to note that market makers could unpredictably start buying the pound again simply because they need this currency. Contrary to popular belief, large players, including commercial banks and corporate clients, buy currencies not just for profit but for operational needs. Such actions, often involving billions, can push the exchange rate in any direction, irrespective of fundamental or macroeconomic conditions.

Our goal is to assess whether the current market movements are justified. When they are not, we acknowledge this, as the behavior of major players is difficult to predict. While trends can be forecasted for most market participants, the movements must be logical and consistent.

For two years, the market priced in the anticipated monetary policy easing by the Federal Reserve. The pound has been declining for 1.5 months, which we believe is just the beginning. The 16-year downtrend remains intact, making the recent two-year rally on the weekly timeframe a deep and illogical correction.

The market seems to have forgotten that the Bank of England will lower its key rate just like the Fed and that the UK economy has been struggling since Brexit in 2016. All this time, the US economy has consistently outperformed the UK's over the last two years.

Despite this, market makers drove the pound higher, and analysts justified the rally with incorrect reasoning. This created an illusion of legitimacy for the pound's rise. It does not matter how much the pound has fallen over the past 16 years. However, what truly matters is the ongoing downtrend. The trend remains bearish until convincing signs of its end emerge (e.g., a 1,600-pip rally from current levels). While such a rally is possible, the question remains: what would be the fundamental justification?

This image is no longer relevant

The GBP/USD pair's average volatility over the last five trading days is 86 pips, which is considered "average." On Wednesday, November 20, the pair is expected to trade within the range of 1.2589 to 1.2761. The higher linear regression channel has turned downward, signaling a bearish trend. Despite multiple bullish divergences on the CCI indicator and occasional oversold conditions, no meaningful corrections have occurred.

  • Support Levels:
    • S1: 1.2634
    • S2: 1.2573
  • Resistance Levels:
    • R1: 1.2695
    • R2: 1.2756
    • R3: 1.2817

Trading Recommendations:

The GBP/USD pair continues its downward trend. We do not recommend long positions, as the factors supporting the pound's rise have already been priced in multiple times. For those trading based solely on technicals, longs may be considered above the moving average with targets at 1.2817 and 1.2878. However, short positions remain more relevant, with targets at 1.2589 and 1.2573 as long as the price remains 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.

Paolo Greco,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

USD/JPY – Analysis and Forecast

The Japanese yen is experiencing strong intraday gains today, primarily driven by a positive GDP report confirming Japan's economic growth. This reinforces expectations that the Bank of Japan (BoJ)

Irina Yanina 12:47 2025-02-17 UTC+2

The U.S. Dollar Continues to Decline

The U.S. dollar is facing downward pressure, which has allowed several risky assets to strengthen, despite the impending trade wars that may affect the global economy in the near future

Jakub Novak 08:01 2025-02-17 UTC+2

What to Pay Attention to on February 17? A Breakdown of Fundamental Events for Beginners

No macroeconomic events are scheduled for Monday. Last week, both the euro and the pound experienced significant growth, despite the absence of a strong macroeconomic or fundamental backdrop. While there

Paolo Greco 06:25 2025-02-17 UTC+2

Overview of the GBP/USD Pair on February 17: The British Pound Enjoys the Euro's Momentum

The GBP/USD currency pair experienced a rise on Friday. Sometimes, the market behaves in a way that seems almost unbelievable. Many traders and analysts are accustomed to the idea that

Paolo Greco 02:49 2025-02-17 UTC+2

Overview of the EUR/USD Pair on February 17: A Sharp Rally in the Euro That Means Nothing

The EUR/USD currency pair continued its rapid ascent on Friday. At the beginning of the week, we were cautious about further euro appreciation, but by the end of the week

Paolo Greco 02:49 2025-02-17 UTC+2

EUR/USD – Weekly Preview: FOMC Minutes, PMI and ZEW Indices, and Trade Tariff Dispute

Last week, EUR/USD tested the 1.0500 level but failed to consolidate above this key resistance (the upper line of the Bollinger Bands indicator on the D1 timeframe). The pair's impulsive

Irina Manzenko 23:20 2025-02-16 UTC+2

Why Did the Euro and Pound Rise Despite Trump Announcing New Tariffs?

The euro and pound ignored the fact that U.S. President Donald Trump instructed his administration to consider imposing retaliatory tariffs on multiple trading partners, increasing the likelihood of a broader

Jakub Novak 12:39 2025-02-14 UTC+2

EUR/USD: Analysis and Forecast

The EUR/USD pair is attempting to reach the key psychological level of 1.0500. This strengthening is driven by President Donald Trump's decision to delay the implementation of reciprocal tariffs, which

Irina Yanina 12:33 2025-02-14 UTC+2

USDX: Trump's Decision to Delay Reciprocal Tariffs Weakens the Dollar

The U.S. Dollar Index (USDX), which tracks the dollar's performance against six major currencies, is showing some stability following recent losses. This comes amid a decline in U.S. Treasury yields

Irina Yanina 12:27 2025-02-14 UTC+2

Why is the U.S. Stock Market Ignoring Rising Inflation? (Possibility of Further Growth in #SPX and #NDX)

It appears that both American investors and those involved in the local stock market have largely dismissed strong inflation data from the U.S. But why is that? This week's reports

Pati Gani 09:35 2025-02-14 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.