29.10.202406:11 Forex Analysis & Reviews: Overview of GBP/USD on October 29; The Pound Sterling Continues Its Struggle

The GBP/USD currency pair showed little activity on Monday. Once again, the price attempted to consolidate above the moving average, but even such a breakout does not guarantee the start of a correction. Although the pound has been declining slowly over the past few weeks, it continues to weaken, and investors have little interest in buying the currency. The reason is apparent: the pound rose excessively for too long, driven solely by the anticipated easing of the Federal Reserve's monetary policy.

In October 2024, it became clear that although the Bank of England has only lowered rates once and is generally reluctant to pursue further easing soon, it will eventually reduce rates. If the Fed's future rate cuts could be priced in two years in advance, why can't the BoE's easing be reflected in just a few months? From our perspective, the pound sterling will likely continue declining, especially as the long-term, 16-year downtrend remains in place. While this trend will eventually end, there are no signs of it happening yet.

On the fundamental and macroeconomic front, no significant events are scheduled in the UK this week. However, these are currently unnecessary for the pound. It's clear to all market participants that expecting economic growth is futile without real rate cuts from the BoE. Inflation in the UK has already dropped below 2%, but the British central bank is still waiting for a slowdown in services inflation and core inflation. Thus, they might continue to wait a little longer, which does not change the outlook.

As a result, this week, the fate of the GBP/USD pair will largely depend on U.S. reports. We previously mentioned that the most critical are ADP, JOLTs, Non-Farm Payrolls, the unemployment rate, and the ISM manufacturing index. Positive data from these reports could bolster the dollar as it is time to rise. Poor data might trigger the long-awaited correction, though this will likely be just a correction.

From a technical standpoint, the CCI indicator has formed several bullish divergences and has entered the overbought zone twice. However, in a bearish trend, these are only signals for a potential correction, which may not even materialize. Since the price cannot even secure a position above the moving average at the moment, we see no reason to buy.

The average volatility for the GBP/USD pair over the past five trading days is 68 pips, considered "average" for this pair. Therefore, on Tuesday, October 29, we expect movement within a range limited by 1.2906 and 1.3042. The higher linear regression channel points upward, indicating that the upward trend remains intact. The CCI indicator formed six bearish divergences before the recent decline, and it has now entered the oversold zone, forming a few bullish divergences, indicating a possible upward pullback.

Nearest Support Levels:

• S1 - 1.2970
• S2 - 1.2939
• S3 - 1.2909

Nearest Resistance Levels:

• R1 - 1.3000
• R2 - 1.3031
• R3 - 1.3062

Trading Recommendations:

The GBP/USD currency pair maintains a downward trend. We are not considering long positions, as we believe that all growth factors for the pound have already been priced in by the market several times. For pure technical traders, long positions with targets of 1.3092 and 1.3123 may be considered if the price secures a position above the moving average line. Short positions remain more relevant, with targets of 1.2909 and 1.2878. However, consolidation above the moving average will likely indicate a correction, which could take considerable time.

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 current 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.