4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - upward.
CCI: 78.2880
On January 13, the British pound sterling in pair with the US dollar continued to rise in price. The main reason for the resumption of the upward trend or a new round of upward movement is the statements of the Chairman of the Bank of England Andrew Bailey the day before yesterday. However, as we already said in yesterday's article, most of the sayings were ignored by market participants, and only positive aspects were worked out. Nevertheless, at the moment, we can state the exit of the pound sterling quotes back to 2.5-year highs, located near the Murray level of "+1/8" - 1.3702. Overcoming this level with a high degree of probability will provoke a new movement to the north, although now it is quite difficult to imagine what will be the fundamental foundations of this movement? In this case, it turns out that one speech by the head of the Bank of England, which was also interpreted in a very peculiar way by the markets, provoked a three-day growth of the pound by more than 250 points. Although, if we recall the "high-volatility swing" mode, then such a movement is very logical. In general, the pound/dollar pair continues to move in jerks, overcoming 300-400 points in one direction for a short period, after which it turns in the opposite direction and begins a new "fast and strong" movement.
Meanwhile, British Prime Minister Boris Johnson said that China was to blame for the emergence of the "coronavirus", which used treatment using pangolins. This was stated by the head of the UK at a meeting of world leaders on environmental protection. "The practice of using pangolin scales to maintain male strength is insane. The coronavirus pandemic was the result of an imbalance in man's relationship with nature. The virus originated from bats or pangolins, because of the silly idea that the crushed scales of this animal will somehow give you strength," Johnson said, subtly criticizing the alternative medicine used in China. A Chinese Foreign Ministry official has already responded to Johnson: "This serious discussion should not involve people who only speculate and make a fuss."
At the same time, London made an official statement that the rules of trade with China will be tightened due to human rights violations in the Uyghur Autonomous Region. Recall that the "Uighur issue" has long been of concern to many countries of the world and the world community. It has been repeatedly reported that human rights are being violated against these people, slave labor is being used, and laws are simply not being observed. Last year, the United States imposed sanctions against China because of the oppression of Uighurs, and now London is also joining them. "The UK government announces a review of the possibility of exporting products to Xinjiang and the introduction of financial penalties for enterprises that do not comply with the laws on modern slavery," the British Foreign Ministry said in a statement. On the other hand, remember the hype about Hong Kong before the coronavirus pandemic! Both Washington and London, which has an agreement with Beijing that Hong Kong should remain autonomous until at least 2048, were going to impose a whole list of duties and sanctions on China because China adopted the law "on internal security", which leveled the autonomy of the metropolis. London has repeatedly stated that Beijing violates international agreements and threatened to suspend all business with China. However, in practice, no one has canceled anything, because business is above all. Thus, the situation with the Uighurs can also be used only for populist purposes. "This package will help ensure that no British organizations, government or private sector, intentionally or unintentionally, benefit from or contribute to human rights violations against Uighurs or other minorities in Xinjiang," said Dominic Raab, the British Foreign Minister.
Meanwhile, the "coronavirus" epidemic, its third wave, is slowly beginning to recede in the UK. Recall that the number of daily cases of the disease increased to almost 70,000 a week ago. For example, during the second, November "wave", the maximum value was 33,000 diseases per day, and during the first "wave" - 6 thousand. Now the incidence rates have decreased to 45-50 thousand per day, which is still a lot. However, it should still be noted that the British pound does not react to this data in any way. It does not react in any way to possible deterioration in the economy, which the day before yesterday was almost openly stated by Andrew Bailey (thesis about GDP in the fourth quarter). Therefore, technical factors remain in the first place. Even the factor of having a trade agreement between London and Brussels has already been played a couple of dozen times. The British currency can't go up forever just based on a deal.
The "swing", which has been going on for several months, is even more stressful. Naturally, in the conditions of "swing", it is extremely difficult to trade and this is understood not only by ordinary traders but also by major players. The latest COT report showed minimal growth in the number of new open contracts. The total number of open contracts by a group of professional traders ("Non-commercial") is four times less than, for example, for the euro currency. Thus, many are now simply afraid to deal with the British currency. And we warn traders that now is not the best time to work out the pound/dollar pair.
From a technical point of view, the quotes are again fixed above the moving average, but in the current conditions, this does not mean anything. Today, the pair may fall by 150-200 points, and tomorrow - by the same amount. Thus, paradoxically, the upward trend is maintained, but at the same time, the "swing" is preserved.
The average volatility of the GBP/USD pair is currently 116 points per day. For the pound/dollar pair, this value is "high". On Thursday, January 14, thus, we expect movement inside the channel, limited by the levels of 1.3516 and 1.3748. The reversal of the Heiken Ashi indicator to the top signals a new round of upward movement within the "swing".
Nearest support levels:
S1 – 1.3611
S2 – 1.3580
S3 – 1.3550
Nearest resistance levels:
R1 – 1.3641
R2 – 1.3672
R3 – 1.3702
Trading recommendations:
The GBP/USD pair started a round of downward movement on the 4-hour timeframe. Thus, today it is recommended to trade lower with the targets of 1.3580 and 1.3519 before the reversal of the Heiken Ashi indicator to the top. It is recommended to consider buy orders with a target of 1.3702 if the price bounces off the moving average line or the Heiken Ashi indicator turns up.
The material has been provided by InstaForex Company - www.instaforex.com