4-hour timeframe
Technical details:
Higher linear regression channel: direction - downward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - sideways.
CCI: 47.9038
If the euro was fixed below the moving average, but returned to it very quickly and it is not clear whether the fall will continue, the pound has clearly adjusted to the moving midline, so the upward movement has good chances of resumption. The technical picture now allows for both versions of the trend, since the higher channel of linear regression is directed down, and the lower channel is directed up. The Heiken Ashi indicator is still directed downward, but in the near future it may turn up. Volatility has increased slightly again.
While the US dollar has regained the support of traders, we are only once again forced to note that yesterday's collapse is in no way related to macroeconomic statistics or the fundamental background. If you carefully follow all the reports, it becomes clear that the US dollar should have fallen both in pairs with the euro and in pairs with the pound. If you pay attention to the statements of Donald Trump, as well as another pile of forecasts about the state of the world, European and American economies, it is obvious that they are all waiting for almost synchronous reduction, and it is impossible to calculate the exact losses at the moment. Therefore, we do not see any specific reasons for the strengthening of the US currency on April 15. Based on this, there are two possible options. The first is technical. Traders started buying the US currency solely on technical grounds. In pair with the pound, the dollar began to rise in value after six consecutive days of falling. Thus, a banal correction was needed. The second option involves the intervention of major market players, corporations and banks, which bought dollars for their needs, but in very large volumes, which led to the growth of the dollar. Thus, on Thursday, April 16, we still do not expect that market participants will react zealously and work out macroeconomic statistics. In any case, no news is expected from the UK, and only one important report will be received from the United States – on applications for unemployment benefits.
Meanwhile, the International Monetary Fund published a document outlining the impact of the coronavirus epidemic on the world economy. According to the IMF, the world economy will lose 9 trillion dollars in 2020, and the year itself will be the most disastrous since the Great Depression. The IMF believes that world GDP will decline by 3%, American GDP will lose 5.9%, and the European Union - 7.5%. And China, where the pandemic began at the end of 2019, will even manage to show growth of 1.2% at the end of the year. According to IMF experts, the current crisis caused by the pandemic is incomparable. The introduction of quarantine measures has led to an extremely rapid disruption of all production chains and capacities, which "has not been seen by any person in his life". Before the "coronavirus crisis", the mortgage crisis of 2008-2009 was considered the worst since the Great Depression. However, this crisis is nothing compared to the current one. In 2008, the world economy declined by only 0.08%, while now it is expected to be at least minus 3%. The IMF also notes in its report that current forecasts provide for the end of outbreaks in all countries of the world in the second quarter of 2020. And in the second half of the year, the "coronavirus" will not particularly bother humanity at all and all restrictions will be lifted. Whether this is true or not, no one can say now. There is still no vaccine, and according to the latest data from doctors, the virus can mutate, it can be completely asymptomatic. And all this complicates the fight against it. Thus, it is possible that the growth rate of diseases will be reduced, as well as the death rate, but this does not mean that the COVID-2019 virus will stop spreading. The head of the Research Department of the IMF, Gian Maria Milesi-Ferretti, in turn, said that in principle, any economic forecasting is almost always wrong, because the economy is constantly experiencing some kind of shock or just changes that lead it off the original path, on the basis of which the forecasts were built. Thus, almost all economic forecasts are very conditional, however, they should not be considered a "weather forecast" that will either come true or not. If the "lockdown" in the world is prolonged or new shocks occur, the loss of the world economy may be much more than 3%. The IMF itself holds the view that saving human lives is much more important than saving economies. However, some countries are already beginning to lift quarantine measures, such as Iran. Some countries did not introduce them at all, such as Sweden and Belarus. And the chief epidemiologist of Sweden said that it is even good if the majority of the country's citizens get sick with "coronavirus" and form a collective immunity.
At the same time, the UK Fiscal Responsibility Authority said the economy could lose 35% of GDP in the second quarter. This reduction may be the highest since 1956. Not because there was a larger reduction in 1956, but because similar research and calculations were just beginning in 1956. As in the rest of the world, the "coronavirus crisis" is expected to be quickly overcome. The economies of all countries of the world will begin to recover in 2021, but it is unknown how long it will take to fully recover to the levels of 2019. This forecast is based on the assumption that general quarantine measures will remain in place in the Foggy Albion for 3 months, and then gradually weaken over the next three months. Unemployment in the UK is also expected to rise to 10%.
Finally, Boris Johnson said yesterday through his representative that he is not going to stop funding WHO, as did his friend Donald Trump. "Coronavirus is a global challenge, it is important that all countries of the world jointly fight this common threat," the statement said.
The average volatility of the pound/dollar pair has stopped falling and is currently 120 points. Over the past four days, the activity of market participants has been steadily growing, although in general, of course, this indicator has fallen very much relative to the values of a month ago. On Thursday, April 16, we expect movement within the channel, limited by the levels of 1.2422 and 1.2662. Turning the Heiken Ashi indicator upward will signal the end of the downward correction.
Nearest support levels:
S1 - 1.2512
S2 - 1.2451
S3 - 1.2390
Nearest resistance levels:
R1 - 1.2573
R2 - 1.2634
R3 - 1.2695
Trading recommendations:
The pound/dollar pair started a corrective movement on the 4-hour timeframe, which may end near the moving average. Thus, it is now recommended to wait for the correction to complete and resume buying the pound with the targets of 1.2634 and 1.2662. A rebound from the moving average line already signals the end of the correction. It is recommended to open sell positions no earlier than when the bears overcome the moving average with the first goal at the level of 1.2329.
The material has been provided by InstaForex Company - www.instaforex.com