empty
20.12.2024 06:28 AM
Overview of the GBP/USD Pair on December 20; Dovish Stability from the Bank of England

This image is no longer relevant

The GBP/USD currency pair plummeted on Wednesday evening, mirroring the movement of the EUR/USD pair. This is hardly surprising given the nature of the Federal Reserve's meeting. However, on Thursday, the Bank of England held its meeting, and the pound recovered nearly 50% of the previous day's losses before the announcement. The basis for this recovery is unclear, but the British currency demonstrated its resilience—a trait we have frequently highlighted. The pound showed gains where none were expected, but the BoE's meeting results again exerted pressure on it.

The BoE delivered no surprises to the market. The interest rate remained unchanged at 4.75%, as widely anticipated. However, three members of the Monetary Policy Committee (MPC) voted for a rate cut rather than just one, as previously forecasted. This outcome signals a more dovish stance from the BoE than many had expected. We have repeatedly noted in our analyses that the BoE's current hawkish position merely sets the stage for faster and deeper rate cuts in the future. The Bank is still grappling with high inflation, but let us attempt to project the situation into next year.

Andrew Bailey stated that the BoE might lower rates four times by 0.25% each in 2025. We learned Wednesday evening that the Federal Reserve is planning 1–2 rate cuts next year. This implies that the BoE will lower rates at least twice as aggressively as the Fed. Can the British pound initiate a new upward trend under such fundamental conditions? We are highly skeptical.

The BoE's official statement noted that the current and next year GDP growth rates are expected to be lower than previously forecasted. The Bank also acknowledged the latest wage growth report (5.2%). The statement emphasized that monetary policy will remain "restrictive" until inflation sustainably returns to the 2% target. Thus, the market is left to wait for inflation in the UK to reach 2%, after which a rapid and significant easing of the BoE's monetary policy is likely. We believe the pound will continue to decline in the medium term. The decline may be gradual in the near term, as the BoE is still reluctant and infrequent in its rate cuts. However, this process could accelerate in 2025.

The long-term bearish trend for the pound remains intact, with no signs of its conclusion. On the 4-hour timeframe, the price has consolidated below the moving average line, signaling the end of a local correction. If this is accurate, the decline of the British currency will continue over the coming weeks. Before the New Year, market volatility may decrease noticeably, but this would represent another pause. We remain focused solely on the downside.

This image is no longer relevant

The average volatility of the GBP/USD pair over the past five trading days is 110 pips. For the pound/dollar pair, this value is considered "high." On Friday, December 20, we expect the pair to move within a range limited by the levels of 1.2418 and 1.2638. The higher linear regression channel is pointing downward, signaling a bearish trend. The CCI indicator recently re-entered the oversold zone, but the pound ultimately appears poised to resume its downward trend, as we have repeatedly warned. Any oversold conditions during a downtrend should only be interpreted as a signal for correction.

Closest support levels:

  • S1 – 1.2451

Closest resistance levels:

  • R1 – 1.2573
  • R2 – 1.2695
  • R3 – 1.2817

Trading Recommendations:

The GBP/USD currency pair maintains a downward trend but continues to correct itself. We still do not consider long positions, as we believe all the factors driving the growth of the British currency have already been priced in multiple times. If you trade solely on technical analysis, longs are possible with a target of 1.2817, provided the price is above the moving average line. However, short positions remain far more relevant now, with targets at 1.2451 and 1.2418.

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
  • Chancy Deposit
    Deposit your account with $3,000 and get $10000 more!
    In January we raffle $10000 within the Chancy Deposit campaign!
    Get a chance to win by depositing $3,000 to a trading account. Having fulfilled this condition, you become a campaign participant.
    JOIN CONTEST

Recommended Stories

EUR/USD. Analysis and Forecast

Today, the EUR/USD pair is attempting to recover its recent losses from the previous session, trading around 1.0420.However, it remains within a descending channel despite efforts to improve the situation

Irina Yanina 15:56 2024-12-31 UTC+2

What to Pay Attention to on December 31? Fundamental Events Analysis for Beginners

Once again, no macroeconomic events are scheduled for Tuesday. In the complete absence of news, it is likely that Tuesday will also witness flat trading. Yesterday's movements in both currency

Paolo Greco 06:56 2024-12-31 UTC+2

The Pound Loses Victory at the Finish Line

You can't go far with just one central bank. For quite some time, the Bank of England's (BoE) cautious strategy benefited the pound. The gradual approach taken by Andrew Bailey

Marek Petkovich 08:48 2024-12-30 UTC+2

Overview of GBP/USD Pair: December 30 - The Holidays Continue, and the Pound Tries to Confuse Traders

The GBP/USD currency pair demonstrated noticeable movement on Friday afternoon, with daily volatility reaching an "average" level. What led to this fluctuation at the end of the week

Paolo Greco 05:05 2024-12-30 UTC+2

Overview of EUR/USD Pair: December 30 - New Year and a "Double Bottom"

On Friday, the EUR/USD currency pair showed some movement during the second half of the day. However, calling it "interesting" would be a stretch, even considering it was a holiday

Paolo Greco 05:05 2024-12-30 UTC+2

EUR/USD. Year in Review: Rollercoasters, Black Monday, and Trump's Victory

The EUR/USD pair closed Friday's trading at 1.0427, marking the end of the last trading week of 2024. As the year comes to a close, it's time to reflect

Irina Manzenko 00:23 2024-12-30 UTC+2

EUR/USD: Analysis and Forecast

Today, the EUR/USD pair is fluctuating slightly above the level of 1.0400, with limited trading volume, struggling to find direction as the year ends. The overall outlook for the euro

Irina Yanina 13:34 2024-12-27 UTC+2

USD/JPY: Analysis and Forecast

Today, the Japanese yen is trying to counter the U.S. dollar, strengthening following the release of Tokyo CPI inflation data for the Consumer Price Index. These figures suggest that

Irina Yanina 10:07 2024-12-27 UTC+2

Overview of the GBP/USD Pair: December 27; No Other Option for the Pound but Further Decline

The GBP/USD currency pair experienced low trading activity on Thursday, remaining largely stagnant. There was a slight downward trend, but it was hardly significant. Analyzing the 4-hour timeframe reveals

Paolo Greco 03:01 2024-12-27 UTC+2

Overview of EUR/USD Pair: December 27; The Holidays Continue

The EUR/USD currency pair experienced stagnation on Thursday, showing minimal trading activity and little to no price movement. While this scenario doesn't ensure that the pair will remain inactive until

Paolo Greco 03:01 2024-12-27 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.