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24.09.202617:31 विदेशी मुद्रा विश्लेषण और समीक्षा: GBP/USD – Smart Money Analysis: Hawkish Expectations for the Bank of England Fail to Support the Pound

The GBP/USD pair continues to decline sharply. Over the past 11 days, bullish traders have made only one attempt to counter the bears. For the rest of the period, the bears have continued to attack with virtually no resistance. I would like to remind you that the U.S. dollar's rise began even before the latest FOMC meeting, at which the market was expecting monetary policy tightening. This week, FOMC officials Thomas Barkin, John Williams, Susan Collins, and others added to the pressure by confirming their intention to continue raising interest rates due to excessively high inflation. It is interesting that, if inflation in the United States was already so high, the Federal Reserve did not raise interest rates over the summer, while virtually none of the Fed officials were speaking at the time about an urgent need for policy tightening. Whatever the answer to this question, it is no longer relevant. The market has latched onto the prospect of tighter Fed policy and has continued buying the dollar steadily for the third consecutive week. Neither chart patterns nor the economic backdrop are currently capable of stopping the decline. Only the bears themselves can stop the bears.

I would also note that the same market expects the Bank of England to implement the same two rounds of monetary policy tightening over the next six months. Deutsche Bank, for example, stated this view this week. According to market expectations, the Fed should raise rates twice, and the Bank of England should also raise rates twice. The result: the dollar has been rising for 11 consecutive days.

Despite the unfavorable picture that has developed for the British pound in recent weeks, the dollar has also suffered numerous setbacks in recent months. If not for the Fed's decision to raise the interest rate in September and its readiness to tighten policy at least one more time before the end of the year, I would still expect the U.S. currency to decline. I still expect this, but from lower levels. However, this week, bullish imbalance 25 was invalidated, and the bulls' chances now lie only in taking liquidity from the low of July 28 or June 24. The chart clearly shows that most reversals over the past year occurred precisely after liquidity was taken, so in my view, this is an opportunity. I cannot say that the dollar's rise should not continue, but in my view, the current decline in the price has nothing to do with economic or geopolitical events.

Are there further prospects for the bears? In my view, there are few, but it must be acknowledged that the dollar remains in a favorable period for itself. The Fed not only decided to raise rates but also communicated to traders its readiness to continue tightening. I do not believe that a prolonged decline in GBP/USD is possible on this factor alone; however, in recent weeks, the market has done little other than price in the FOMC rate hike. What could prevent it from buying the dollar for several more weeks against the backdrop of Fed monetary policy tightening?

Chart analysis shows that the picture became completely bearish after liquidity was taken from the May highs. The pound reacted to bearish imbalance 27, which triggered a new decline in the price. The target of the decline was imbalance 25, and this pattern was both worked out and broken through. A new bearish imbalance 29 was also formed, and another bearish imbalance may be formed this week.

The economic news flow on Thursday was virtually absent, but the bears continue to attack today. However, the economic backdrop is currently incapable of stopping the bears' attacks regardless of what it may look like.

The overall news backdrop remains such that, in the long term, I cannot expect anything other than a decline in the U.S. currency. The war between Iran and the United States has not changed my long-term expectations. Geopolitics forced the market to remember the dollar's safe-haven status for several months, but the conflict has already passed its most active phase. The future of FOMC monetary policy remains uncertain, while the market itself continues to expect only tightening, which is the main reason for the bears' positive sentiment. In my view, any rise in the dollar is temporary and random in nature. I would also note that GBP/USD has been trading in a range for an entire year. A range allows traders to expect virtually any movement within its boundaries. Traders have so far been unable to break out of the range.

U.S. and U.K. Economic Calendar:

• United States – Change in Durable Goods Orders (12:30 UTC).
• United States – University of Michigan Consumer Sentiment Index (14:00 UTC).

On September 25, the economic calendar contains two entries, of which I would note only the report on Durable Goods Orders. The economic backdrop may influence market sentiment in the second half of the day on Friday.

GBP/USD Forecast and Trading Tips:

The long-term picture for the pound remains bullish. In recent weeks, the bears have taken control of the initiative. Liquidity taken from the May 1 swing allowed the decline to begin; a sell signal formed within inverted imbalance 27, followed by another bearish signal within the same pattern. The price reaction to imbalance 25 called for closing short positions, but the bulls never launched an attack. Thus, the pound continues its virtually free fall, which may continue all the way to the June lows.

*यहां पर लिखा गया बाजार विश्लेषण आपकी जागरूकता बढ़ाने के लिए किया है, लेकिन व्यापार करने के लिए निर्देश देने के लिए नहीं |

Samir Klishi,
Analytical expert of InstaSpot
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