GBP/USD. November 7. Results of the day. The Bank of England is moving towards easing money

Trading 08 nov 2019 Donner votre avis

4-hour timeframe


Amplitude of the last 5 days (high-low): 76p - 46p - 67p - 58p - 53p.

Average volatility over the past 5 days: 60p (average).

Wednesday, November 7, takes place in relatively quiet trading for the GBP/USD pair with the same weak downward bias. The average volatility of the pair over the past five days is 60 points. To date, the pair has passed 85. Thus, we are not entitled to say that there has been a surge in volatility in the market, and traders returned to the market in full force. There was only a very weak reaction to the meeting of the Bank of England, to its results. Thus, the downward trend persists, the Bollinger bands are directed downward and do not expand, which once again indicates the weakness of the trend, but there may be some problems with overcoming the level of 1.2794.

While campaigns were officially launched in the UK, the BoE held its next meeting in 2019. The rate and the planned monthly volume of repurchased assets remained unchanged, but there were some surprises. In the vote to change the key rate, two members of the nine monetary committee voted to lower. Michael Saunders and Jonathan Haskel voted to ease monetary policy, citing growing threats to economic prospects. In principle, it's quite a popular rhetoric lately. In other words: geopolitical risks are growing, protectionist policies are on the alert, the China-US trade conflict is negatively affecting the global economy, but the UK also has its own national problem - Brexit. In the general opinion, the BoE will not accept any change in the key rate (until today even a rate increase was supposed in case of Brexit with a deal), until the situation with Brexit is clarified. However, against this background, one question arises: what if the situation with Brexit does not clear up in January 2020? After all, no one gives a guarantee that the election results will give unequivocal support to Conservatives or Laborites. Accordingly, purely hypothetically, the composition of the Parliament may not change at all compared with the current one. What then? Another delay of Brexit. But economic indicators are falling not only in the EU, but also in the UK. Industrial production, inflation, GDP are the problems of both the British authorities and the Central Bank. Thus, a decrease in the rate can happen even if Brexit takes longer than before the end of January 2020. Monetary policy easing by the British regulator can occur even if there is no "hard" Brexit at all. As a rule, the harbinger of a change in the key rate is just such a vote, where suddenly the balance of votes from "unanimous" is reversed. Now two members of the committee have voted in favor of reducing the rate; at the next meeting, there may be 4 or 5 ...

This is very bad news for the British pound, which showed a frankly restrained reaction today. Despite the fact that Brexit remains the number one topic for traders, the potential and possible lowering of the key rate cannot be left without attention of traders. And if the rate is lowered before Brexit, this will mean that the economic situation is deteriorating at a very high rate in the UK, and after the long-awaited Brexit (any option), the situation may deteriorate to critical values. Earlier, the BoE held this trump card (easing monetary policy) precisely in case of disordered Brexit. If you have to start it in the course earlier, it will narrow the variability of the regulator in the future.

By the way, the speech of Mark Carney, or rather his rhetoric, was also perceived by many traders as very specific hints of lowering the key rate at the next meeting. Mark Carney said that "the risks associated with the latest economic forecasts of the central bank are distorted in a negative direction." Carney also said that the central bank assumes that the country will leave the EU under Boris Johnson's deal. It is on the basis of this option that the forecasts of the British regulator are built.

From a technical point of view, the currency pair continues a slight downward movement. All indicators are directed downward, although volatility remains rather weak. The support level of 1.2836 has been overcome, which can provide confidence to the bears, along with today's results of the BoE meeting, which can safely be called moderately dovish. The last trading day of the week will be deprived of any macroeconomic publications in the UK, so all attention is paid to the political sphere of the country.

Trading recommendations:

GBP/USD is in a downward correction, which may develop into a downward trend. Thus, it is best now to still wait for the completion of the low volatility segment of the trend. Long positions have lost their relevance, as the pair has consolidated below the critical line. You can sell the pound with targets at 1.2736 and 1.2667, but in small volumes.

Explanation of the illustration:

Ichimoku indicator:

Tenkan-sen is the red line.

Kijun-sen is the blue line.

Senkou Span A - light brown dotted line.

Senkou Span B - light purple dashed line.

Chikou Span - green line.

Bollinger Bands Indicator:

3 yellow lines.

MACD indicator:

Red line and bar graph with white bars in the indicator window.

Support / Resistance Classic Levels:

Red and gray dotted lines with price symbols.

Pivot Level:

Yellow solid line.

Volatility Support / Resistance Levels:

Gray dotted lines without price designations.

Possible price movement options:

Red and green arrows.

The material has been provided by InstaForex Company -

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