empty
10.12.2024 03:08 AM
Overview of the GBP/USD Pair for December 10; Sterling's Rise Should Not Be Misleading

This image is no longer relevant

The GBP/USD currency pair also traded in both directions on Monday, as if the market deliberately aimed to confuse traders. Last week, the British pound gained strength despite very few reasons for such a move. Some U.S. reports were weaker than expected, and Andrew Bailey announced four rate cuts for next year. However, those rate cuts represent a dovish stance, which should have triggered a decline in the pound. At the same time, Jerome Powell reiterated that the Federal Reserve is not in a hurry, emphasizing that the economy is in excellent shape, giving the Fed the time it needs. Friday's Nonfarm Payrolls report supported Powell's statements. Thus, we believe the dollar had more reasons to appreciate last week than the pound.

The reasons for the pound's strengthening are similar to those of the euro: technical factors. The pair had declined for two consecutive months, making at least a minor correction necessary. Understanding this leads to the same assumption as with the euro: the decline could resume this week. Of course, no one can predict the outcome of Wednesday's inflation report, the week's key event (apart from the European Central Bank meeting). If inflation shows no growth or decline, it could justify further dollar selling. However, regardless of how strong the correction becomes, it remains a correction.

It's worth noting (clearly visible on the weekly timeframe) that the last corrective wave reached 76.4%, with the price correcting over two years. At the same time, this observation pertains to a long-term perspective; even if the growth over the past two years represents the start of a new multi-year trend (for which there is currently no basis), a downward correction is now required to return the pound to at least the 1.18 level. For the 16-year downtrend to be considered over, the British currency would need to rise above 1.4230. What reasons are there for such a strong rise in the pound after it has already gained over 2,000 pips?

The conclusions remain the same as before. The pound may continue to rise for a while, and the market may keep ignoring the Bank of England's monetary policy easing, which will either begin or accelerate regardless. Similarly, the market may continue to overlook its misjudgment regarding easing U.S. monetary policy. In addition, large players may irrationally continue pushing the pound higher in the long term without any logic. However, none of this changes the bigger picture. Any growth in the pound is a correction. Any strong growth is an illogical movement that cannot be predicted. Such movements can only be explained retrospectively by emphasizing supportive factors while ignoring opposing ones.

This image is no longer relevant

The average volatility of the GBP/USD pair over the last five trading days is 78 pips, which is considered "moderate" for this pair. On Tuesday, December 10, we expect the pair to move within a range defined by the levels 1.2684 to 1.2840. The higher linear regression channel is pointing downward, signaling a bearish trend. The CCI indicator has formed multiple bullish divergences and has entered the oversold zone several times. While a correction has begun, its strength is difficult to predict.

Nearest Support Levels:

  • S1: 1.2695
  • S2: 1.2573
  • S3: 1.2451

Nearest Resistance Levels:

  • R1: 1.2817
  • R2: 1.2939
  • R3: 1.3062

Trading Recommendations:

The GBP/USD pair maintains a bearish trend but continues to correct upward. We are not considering long positions at this time, as we believe that all growth factors for the British currency have already been priced in by the market several times. For those trading based on "pure" technicals, long positions may be possible with targets at 1.2817 and 1.2840 if the price moves above the moving average line. Short positions, however, are currently more relevant, with a target of 1.2573, provided the price consolidates back 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

Recent gas market developments

The gas market saw an uptick following the announcement by US President Donald Trump of a state of emergency in the US oil and gas sector, along with his approval

Miroslaw Bawulski 11:41 2025-01-21 UTC+2

USD/JPY: Analysis and Forecast

The current position of the Japanese yen reflects a complex balance between the positive sentiment in equity markets and expectations of interest rate hikes by the Bank of Japan

Irina Yanina 11:37 2025-01-21 UTC+2

USD/CAD: Donald Trump's Tariff Statements for Canada Shake the Market

The USD/CAD pair shows a correction after significant intraday growth. The Canadian dollar weakened under selling pressure after U.S. President Donald Trump announced plans to impose 25% tariffs on imports

Irina Yanina 11:29 2025-01-21 UTC+2

Overview of the GBP/USD Pair on January 21: The Pound Clings to a Straw

The GBP/USD currency pair experienced growth on Monday, coinciding with the start of the U.S. trading session. It's important to note that this growth did not stem from any specific

Paolo Greco 05:19 2025-01-21 UTC+2

Overview of the EUR/USD Pair on January 21: Trump's Inauguration Changes Nothing

The EUR/USD pair traded relatively calmly on Monday, at least during the first half of the day. However, with the opening of the U.S. session, volatility surged sharply. The subsequent

Paolo Greco 05:19 2025-01-21 UTC+2

EUR/USD: The Illusion Bubble – Dollar Weakens Amid Strengthened Risk Sentiment

Markets are optimistic ahead of Donald Trump's inauguration. Increased risk appetite has allowed EUR/USD buyers to recover from Friday's lows, with the pair now trading above the 1.0300 target

Irina Manzenko 23:40 2025-01-20 UTC+2

USD/CAD: Analysis and Forecast

The USD/CAD pair retreated slightly after reaching its highest level since March 2020 during the Asian session on Monday, amid a modestly weaker US dollar. However, this pullback

Irina Yanina 13:23 2025-01-20 UTC+2

The Market Finds Shelter

The S&P 500 achieved its best weekly performance since the November U.S. presidential election, just before Donald Trump's inauguration. Initially, investors worried that his protectionist policies could negatively impact

Marek Petkovich 08:02 2025-01-20 UTC+2

EUR/USD Weekly Preview: Trump's Inauguration, Lagarde's Speech, ZEW and PMI Indices

The economic calendar for the upcoming week is not packed with significant events. Key reports for EUR/USD (Nonfarm Payrolls, CPI, PPI) were released in the first half of January, while

Irina Manzenko 05:24 2025-01-20 UTC+2

Overview of the GBP/USD Pair on January 20: The Fairy Tale Is Over, but There Was Never a Fairy Tale

On Friday, the GBP/USD currency pair experienced another decline. Among the macroeconomic data released that day, one notable highlight was yet another disappointing data from the UK. Although

Paolo Greco 04:46 2025-01-20 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback