empty
01.02.2023 08:46 AM
GBP/USD. Overview for February 1, 2023

This image is no longer relevant

The GBP/USD currency pair began the new week as uninteresting as possible. Since volatility has significantly decreased, traders have adopted a wait-and-see strategy. Since experts are still divided about how much the Bank of England rate will be raised this Thursday, if this behavior is appropriate in the case of the euro, it is even more appropriate in the case of the pound. Discussing the macroeconomic background of Monday and Tuesday is pointless because not a single significant report was released during this period. The British pound fell by roughly 50–60 points yesterday, but it also managed to stay inside the side channel, which is visible even on the 4-hour TF. Formally, a "double top" is formed as a result. The only thing left to do is estimate how much the pound will depreciate.

We have already stated that we anticipate a decline in the value of the euro. Therefore, it will be highly logical and reasonable if both of the key instruments of the foreign currency market move in the same direction during the upcoming few weeks. However, if the Bank of England increases the rate by 0.25%, it can avoid this. To be honest, the likelihood of a rate increase of 0.25 percent or 0.50 percent is currently 50/50. It is therefore quite challenging to determine which of these options traders have already factored into the current exchange rate of the pound sterling. The most aggressive course of action was chosen logically, given that the pound has been rapidly increasing lately. There is no definitive answer to this query; nevertheless, it is also possible that the market will cause the Fed's rate hike to be delayed. A stronger tightening will come as a pleasant surprise to the market if it is priced into an option with a 0.25 percent increase. The pound will, however, have a much greater chance of breaking the "double top" formation and continuing to rise as a result of this conclusion. You should exercise the utmost caution on Thursday as a result. If we are almost certain that the euro currency will fall, we can expect the pound to fall dramatically by around 60%.

The medium-term prospects of the British pound are also still highly unclear. If we ignore the rates, the British economy is in a very dire state. In the sense that the economy could experience a severe recession in 2023 that could last more than a year. There is no method to "extinguish" inflation. The BA cannot continuously raise the rate. We don't see any reason why the pound shouldn't continue to increase in value at the same rate it has for the past few months. It should be observed that the pound increased by 2,100 points or 50% of the two-year downward trend. We believe it is both excessive and abrupt. By the way, it has already been decided to slow down the tightening of the Fed's monetary policy. We would assert that there are no solid justifications for a new expansion of either the euro or the pound.

Separately, we'd want to discuss how the market might respond to all of the events scheduled for the second half of the week. Similar circumstances have already occurred recently when three Central Bank meetings were held in three days and statistics on nonfarm employment and unemployment in the United States were made public. The market's response was then lower than many had anticipated. So perhaps this time. It should be acknowledged that events will be layered on top of one another in terms of how quickly the market reacts to them. Late tonight, the Fed meeting's outcomes will be made public. European markets won't be able to determine them until the following morning. The outcomes of the ECB and BA meetings will also be made public in the morning. And as we previously learned above, the British regulator's intentions remain uncertain. In other words, not only will the most significant events be placed on top of one another, but the events' contents may also be unexpected. We recommend starting with the option with the euro and pound falling in value, but remember to set a stop loss. They will be very beneficial to traders throughout the next few days.

This image is no longer relevant

Over the previous five trading days, the GBP/USD pair has displayed an average volatility of 89 points. This number is the "average" for the dollar/pound exchange rate. Thus, we anticipate movement inside the channel on Wednesday, February 1, with movement being limited by levels of 1.2230 and 1.2408. A new attempt to continue the upward trend is indicated by the Heiken Ashi indicator's upward reversal.

Nearest levels of support

S1 – 1.2299

S2 – 1.2268

S3 – 1.2238

Nearest levels of resistance

R1 – 1,2329

R2 – 1.2360

R3 – 1.2390

Trading Suggestions:

In the 4-hour timeframe, the GBP/USD pair has been consolidating below the moving average. With targets of 1.2268 and 1.2230, it is now possible to maintain short positions. If the price is fixed above the moving average line, you can start trading long with targets of 1.2408 and 1.2451. Furthermore, the pair has been flat in recent weeks.

Explanations for the illustrations:

Determine the present trend with the use of linear regression channels. The trend is now strong if they are both moving in the same direction.

Moving average line (settings 20.0, smoothed): This indicator identifies the current short-term trend and the trading direction.

Murray levels serve as the starting point for adjustments and movements.

Based on current volatility indicators, volatility levels (red lines) represent the expected price channel in which the pair will trade the following day.

A trend reversal in the opposite direction is imminent when the CCI indicator crosses into the overbought (above +250) or oversold (below -250) zones.

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

Markets Begin Preparing for the Fed Monetary Policy Meeting (Potential Correction in Bitcoin and #SPX)

The inaugural week for Donald Trump has been marked by celebrations, but it has seen relatively few significant economic data releases. Consequently, market participants are focusing their attention

Pati Gani 08:21 2025-01-23 UTC+2

What to Pay Attention to on January 23? A Breakdown of Fundamental Events for Beginners

Very few macroeconomic events are scheduled for Thursday—just one, to be precise. In the U.S., the weekly Unemployment Claims Report will be published. These reports rarely show significant deviations from

Paolo Greco 06:40 2025-01-23 UTC+2

Overview of the GBP/USD Pair on January 23: The Pound Sterling Creeps Up and Is Already Overbought

The GBP/USD currency pair continued its modest upward trend on Wednesday, despite the absence of specific or local reasons for this movement. Throughout the day, there were no macroeconomic reports

Paolo Greco 05:43 2025-01-23 UTC+2

Overview of the EUR/USD Pair on January 23: Promises Are Not Actions

The EUR/USD currency pair exhibited a restrained and calm trading pattern on Wednesday, as anticipated. Throughout the day, there were no significant movements, but the euro continued to rise steadily

Paolo Greco 05:43 2025-01-23 UTC+2

EUR/JPY: What Are the Growth Prospects for the EUR/JPY Pair Going Forward?

The EUR/JPY pair has been drawing buyers for the fourth consecutive day, continuing its recovery from the 159.65 level, where last week's monthly low was recorded. The intraday positive trend

Irina Yanina 11:36 2025-01-22 UTC+2

U.S. Stock Investors Welcome Trump's Policy Implementation (Gold and #NDX Prices May Continue Rising)

Trading on U.S. stock markets concluded on a positive note on the first working day under the new president. U.S. stock indexes experienced broad support, driven by increased demand

Pati Gani 09:37 2025-01-22 UTC+2

Overview of the GBP/USD Pair on January 22: The Pound's Brief Respite Comes to an End

The GBP/USD currency pair mirrored the decline of the EUR/USD on Tuesday. As noted in previous analyses, the dollar's drop on Monday lacked a fundamental basis, and a correction

Paolo Greco 04:42 2025-01-22 UTC+2

Overview of the EUR/USD Pair on January 22: We Lived Through Boring Years Without Trump

The EUR/USD currency pair began to recover much of the ground it lost on Monday during Tuesday's session, as expected. On Monday, the U.S. dollar experienced a sharp decline

Paolo Greco 04:42 2025-01-22 UTC+2

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
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.