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GBP/USD analysis and forecast for October 21, 2021

Relevance up to 17:00 UTC–4

At yesterday’s trading, the pound demonstrated excellent technique and almost exactly fulfilled yesterday’s forecast for GBP/USD. However, let’s start with a slightly different topic, namely, the expectations of further monetary policy of the Bank of England. Experts of some large commercial banks believe that the British Central Bank will start tightening its monetary policy next year, and the increase in the main interest rate will be 10-15 basis points. I think it’s no secret that it is monetary policy, especially raising or lowering the main interest rates. These are the most important events that most significantly affect the price dynamics of a particular currency. If we return to the forecasts for the Bank of England, there is an opinion that after November, the English regulator will begin a gradual and very smooth tightening of its monetary policy. It is expected that the volume of bond purchases will be reduced first. At the same time, it is difficult to count on the stable economic growth of the British economy, especially against the background of how the fourth wave of COVID-19 is raging. As for inflation, experts believe that it will gradually decrease in 2022.

Noting today’s macroeconomic events, it is worth highlighting the balance of industrial orders of the Confederation of British Industrialists, which will be published at 11:00 London time. From the American data, we draw attention to the number of initial applications for unemployment benefits and the Philadelphia Federal Reserve’s manufacturing index and housing sales on the secondary market.

Daily

So, as expected the day before, the decline of the GBP/USD pair towards 1.3700/10 should be used to open purchases. It was suggested to look for confirmation signals on smaller timeframes. Having declined at the auction on October 20 to the level of 1.3740, the pair turned northward and ended Wednesday’s trading at 1.3819. The closing price above the significant level of 1.3800 is certainly a plus for bulls on the pound. It’s all about the strength of the sellers’ resistance level at 1.3832, about which the pair struggled for two days in a row. However, so far, it has not been able to go up this mark. At today’s auction, the quote had already reached 1.3832, but it bounced down again. However, the bulls on the instrument are not going to give up. Having found support on the broken border of the Ichimoku indicator cloud, the pound/dollar pair is trying to reduce the current insignificant losses and again storm the sellers’ resistance at 1.3832. There is a strong feeling that everything will work out for them. I suggest risky and aggressive buying from current prices. In case of a decline, we observe the behavior of the price in the area of 1.3780-1.3750. I do not rule out a decline in the pair, but in general, I maintain a bullish mood for the pound.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

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