The GBP/USD currency pair made a small correction to start the new trading week. The pound did not consider growth on Monday, in contrast to European currencies, which rose significantly. This raises the question because if the growth of the euro is not justified, we can expect a similar increase in the British pound. However, since nothing similar happened, Monday can be considered "the strangest." In addition to the separation between the euro and the pound, the growth and volatility of the euro is also unexpected. But let's get back to the pound, which has also risen significantly over the past few weeks. We have repeatedly emphasized how the British pound had more of an explanation from the start to rise than the dollar. Since Great Britain's Supreme Court banned Scotland from holding an independence referendum without official permission from London last week, there have been more this month. Although this is good news for the pound, it should be noted that, for example, the BA rate is higher than the ECB rate. In addition, the departure of Liz Truss from the UK has changed the balance of power, leading to the final fall of the pound. Rishi Sunak, who knows more about economics than Truss, arrives. However, the British currency has more reason for growth than the European one. We consider that there is no sufficient reason for the pound to show such strong growth.
The pound/dollar pair also has everything you need to move upwards from a technical perspective. On the 4-hour and 24-hour TF, all technical indicators are initially pointing upwards. This is enough for traders to engage in trading for growth. The pound sterling has the potential to rise in value as long as it likes, even without macroeconomic support and firm fundamentals. It's unlikely, but it wouldn't look good either. All we can do is continue the trend. You can't lose sight of the big picture; you need to remember that the pound currently does not have sufficient justification for rapid growth, but if the technique is bullish, selling is not justified.
Is Jerome Powell able to defend the dollar?
Jerome Powell's speech will be the main event of the week. It is scheduled for Wednesday, and we are not sure of the Fed chairman's ability to support the US dollar. It is reasonable that the US dollar is now declining as it observes a slowdown in the growth rate of the main rate. If so, only one thing in Jerome's speech could defend the dollar. Powell needs to emphasize that growth can be slower but also longer and stronger. Undoubtedly, there is still time before the next Fed meeting. A new inflation report will be published, on which the Fed's monetary policy now depends almost entirely. Powell could, however, say what is expected of him on Wednesday. To say that the US dollar may fall again in this situation is debatable.
Even the following picture may exist from our point of view. Although only because a technical correction was needed, the dollar started to rise this week. The pound should at least be corrected as it has been rising for weeks without reason or explanation. Also, Powell's speech will occur at the same time and may or may not have anything to do with the strengthening of the US dollar. It also applies to non-agriculture on Fridays. Regardless of the strength or weakness of the report, the market is now showing that it is ready to trade on trend and volatility, even without fundamental and macroeconomic background. Macroeconomic reports can only affect the pair indirectly, despite how important they are. Moreover, it is unlikely to affect market sentiment or the development of trends on a global scale.
Over the previous five trading days, the GBP/USD currency pair had an average of 113 volatility points. This value is "high" for the dollar/pound exchange rate. Therefore, on Tuesday, November 29, we expect movement in the channel and constrained by the levels of 1.1936 and 1.2160. A reversal of the Heiken Ashi indicator indicates that the upward movement has resumed.
Nearest support level S1 – 1.2024 S2 – 1.1963 S3 – 1.1902
Nearest resistance level R1 – 1.2085 R2 – 1.2146 R3 – 1.2207
Trading Suggestion:
In the 4-hour time (TF) chart, the GBP/USD currency pair started a weak correction. Therefore, at this time, new buy orders with targets of 1.2146 and 1.2160 should be considered if the Heiken Ashi indicator turns upwards. With targets of 1.1936 and 1.1902, open sell orders should be set below the moving average.
