4-hour timeframe
Technical data:
The upper channel of linear regression: direction – up.
The lower channel of linear regression: direction – down.
The moving average (20; smoothed) – sideways.
CCI: 26.6625
If the EUR/USD currency pair is moving steadily down, albeit with minimal volatility, then the GBP/USD pair just froze in one place. Since the beginning of this week in the UK, there have been as many as 5 major macroeconomic reports published, among which are GDP, inflation and industrial production. Any of these reports could and should have sent the pair far down. However, instead of paying attention to the deteriorating macroeconomic statistics in Albion, traders paid attention to the news that Nigel Farage's party does not want and will not compete in the election with the conservatives. After that, the pound rose by 80 points and stuck near the moving average line directed sideways. If the currency pair has strong psychological barriers to further downward movement (the pair is near 2-year lows), then the British pound has no such barriers. After the quotes rose by 800 points, we did not see even a correction commensurate with this growth. As we have already said, all the most important macroeconomic reports are ignored, the increased probability of lowering the key rate by the Bank of England is ignored. Almost all events and macroeconomic data from the States are also not taken into account by market participants. Thus, there is a strong impression that the markets are waiting for something. And this "something" can only be parliamentary elections. As practice shows, traders do not want to consider any information other than directly related to the election or Brexit. Thus, such news should be expected in the hope that the pair will start moving again.
By the way, the consumer price index for October was released in the UK yesterday, which showed a slowdown in inflation to 1.5% y/y, while a slowdown to 1.6% was forecasted. Well, this is another negative factor in the treasury of the British pound, which, moreover, increases the chances of lowering the key rate by the Bank of England at the next meeting. Another important indicator will be published today – retail sales for October. According to traders' expectations, the indicator should grow by 3.7% y/y, which is much higher than the previous value. However, firstly, we believe that the real numbers may be below forecasts, and secondly, what difference does it make, what numbers we will see if the British pound continues to trade in the 30-point range?
We spoke in the article on the EUR/USD pair about the paradoxical situation, as a result of which the euro currency does not want to fall further, although there are all the necessary grounds for this. In principle, the British pound is now in a similar situation. It also does not want to get cheaper at a time when the factors for its fall are even greater than that of the euro currency. We should not forget about Brexit, which is once again put on pause, about the political crisis, which is not the fact that it will be resolved by holding another early election. In addition to Brexit and elections, the UK economy is getting closer to an outright crisis, and the country has not even left the European Union.
In conclusion, we can say the following. First, for the GBP/USD pair to move in the coming days, fundamental information regarding the election or Brexit is required. All other topics are ignored. Secondly, since traders are unlikely to conduct such a sluggish trade until December 12, it is still possible to expect a recovery in volatility and trend movement, but you need to wait for this moment, and not try to predict it. Technical indicators for the time being accurately indicate a flat, within which it is not recommended to trade.
Nearest support levels:
S1 – 1.2848
S2 – 1.2817
S3 – 1.2787
Nearest resistance levels:
R1 – 1.2878
R2 – 1.2909
R3 – 1.2939
Trading recommendations:
The GBP/USD pair is trading neatly along with the moving average, so we do not recommend traders to open any positions now. To have the opportunity to trade, you need to wait until the quotes of the pound/dollar pair "detach" from the moving average line. Considering that traders are practically not responding to fundamental data, the flat can last from several days to several weeks. For such a scenario, you must also be prepared.
In addition to the technical picture, fundamental data and the time of their release should also be taken into account.
Explanation of the illustrations:
The upper channel of linear regression – the blue lines of the unidirectional movement.
The lower channel of linear regression – the purple line of the unidirectional movement.
CCI – the blue line in the regression window of the indicator.
The moving average (20; smoothed) – the blue line on the price chart.
Support and resistance – the red horizontal lines.
Heiken Ashi – an indicator that colors bars in blue or purple.
Possible variants of the price movement:
Red and green arrows.
The material has been provided by InstaForex Company - www.instaforex.com