FX.co ★ GBP/USD Overview: Weekly Preview. Bank of England Meeting May Halt Growth, but It's Complicated

The GBP/USD currency pair experienced a slight pullback on Friday after rising on Wednesday and Thursday, but overall, we can draw similar conclusions as for the EUR/USD pair. The defining moments will take place next week, not the previous one. Firstly, this is due to the macroeconomic data coming from the US. Secondly, it is related to the Bank of England meeting. Unlike the European Central Bank, the BoE has not succeeded in bringing inflation down to its target level, which is nearly the same across central banks at 2%. Inflation in the UK is almost double the target level, and assessing the trend based on a single report is considered inappropriate. Yes, last month the consumer price index in the UK slowed to 3.6%, but that is just one month. Even if inflation does not increase further, it remains high, which does not suggest further easing of monetary policy.

However, the BoE, despite high inflation, is inclined towards easing monetary policy. This is due to a declining labor market, rising unemployment, and low economic growth. In our view, the BoE is following the Federal Reserve, nearly mimicking its actions and methods for addressing economic issues. Thus, in the US, we observe rate cuts amid rising inflation, and in the UK, we see rate cuts amid high inflation. If rates are being lowered, it is unlikely that consumer prices will slow down to 2% any time soon.

But we are more interested in how the British pound will react to the easing. The answer to this question is fairly straightforward—there will be a decline—but it is not that simple. The GBP/USD pair maintains a long-term upward trend. The pair has been correcting for five months and, from our perspective, has shown a much more substantial decline during this correction than it deserved. Even if the decline's magnitude is justified, the correction could be completed on the daily timeframe. If that is the case, then the British pound will continue to rise regardless. The BoE's dovish decision will not pose a problem for the British currency. The market may well trade against the fundamental backdrop. It is worth remembering that the US dollar performed well in October and November during the American "shutdown" and after two interest rate cuts by the Fed.

Thus, we believe that the British pound will continue to rise in any case. On the daily timeframe, the pair has secured itself above the important Senkou Span B line, indicating a break of the downward trend. During specific events or reports, the pound may fall; however, these will be corrections or pullbacks, no more. One of those pullbacks has already started after a "bearish" divergence and two CCI entries into the overbought region.

The average volatility of the GBP/USD pair over the last five trading days is 69 pips, which is considered "average" for the pound/dollar pair. On Monday, December 15, we expect the pair to trade within a range bounded by 1.3300 and 1.3438. The upper linear regression channel is directed downward, but this is only due to a technical correction on higher timeframes. The CCI indicator has entered the oversold area 6 times in recent months and has formed several "bullish" divergences, consistently signaling a resumption of the upward trend. Last week, the indicator formed yet another "bullish" divergence, but the week ended with two entries into the overbought zone and a "bearish" divergence. Conclusion: correction within an upward trend.

Nearest Support Levels:

• S1 – 1.3367
• S2 – 1.3306
• S3 – 1.3245

Nearest Resistance Levels:

• R1 – 1.3428
• R2 – 1.3489
• R3 – 1.3550

Trading Recommendations:

The GBP/USD currency pair is attempting to resume the upward trend of 2025, and its long-term prospects remain unchanged. Trump's policy will continue to put pressure on the dollar; therefore, we do not expect the American currency to grow. Consequently, long positions with targets at 1.3489 and 1.3550 remain relevant for the near term while the price is above the moving average. If the price is below the moving average, small shorts can be considered with targets at 1.3300 and 1.3245 based on technical grounds. From time to time, the US currency shows corrections (on a global scale), but for the trend to strengthen, it needs signs of resolution in the trade war or other positive global factors.

Explanations for Illustrations:

• Linear regression channels help identify the current trend. If both are directed in one direction, it indicates a strong trend.
• The moving average line (settings 20,0, smoothed) determines the short-term trend and direction in which trading should be conducted.
• Murray levels are target levels for movements and corrections.
• Volatility levels (red lines) indicate the probable price channel in which the pair will operate over the next day based on current volatility metrics.
• The CCI indicator entering the oversold area (below -250) or the overbought area (above +250) signifies that a trend reversal to the opposite direction is imminent.