Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - sideways.
CCI: 60.7806
The British pound also continued its upward movement during the second trading day of the new week. However, it was not as strong as the euro currency, so by the end of the day, it only managed to get to the moving average line and go slightly above it. Thus, the trend for the pound/dollar pair can also change to an upward trend, although we still do not see what can make the British pound more expensive in a pair with the dollar. However, in the article on the euro currency, we assumed that the issue is not the euro or the pound and the demand of market participants for these currencies. The case now depends entirely on the US, Trump, and the US dollar. Indirectly, this hypothesis is confirmed by COT reports, which show that demand for the pound and the euro currency did not increase during the period of appreciation of these currencies, as well as the fact that both currencies are moving almost synchronously in recent weeks. From the UK on Tuesday, June 23, we received information that business activity in the manufacturing and services sectors increased significantly in June and is 50.1 and 47.0 points, respectively. This is good news for the pound, however, we are not at all sure that these reports were the reason for the strengthening of the British currency. Although similar strong business activity indices from overseas did not cause any reaction from traders. Also yesterday, Bank of England Governor Andrew Bailey made a speech, which recently decided to expand the asset repurchase program by 100 billion pounds. Yesterday, the head of the BA said that before starting to raise the interest rate, it is necessary to unload the balance of the Central Bank. Andrew Bailey had nothing more interesting or important to say. Therefore, his words also could not provide any support for the British currency. Therefore, we come to the same conclusion as for the euro/dollar pair. It is not the pound that is rising at this time, but the US dollar that is declining. But the reasons for the latter can now be found in an enormous number.
We have already noted that you can find reasons and motives for anything in earlier articles. Any drop or increase in the currency market can be "explained". The only question is whether this explanation is true. We believe that the only reason why the US currency may fall now is the distrust of traders and investors in the dollar against the backdrop of the escalating situation between China and the US, as well as against the backdrop of the political crisis that is heating up in the United States. The crisis, like the escalation of the conflict, is not a one-minute event. As a rule, all market players have plenty of time to assess the current situation and make a decision on which assets to transfer their funds to. Thus, the fact that the US dollar began to fall in price only in the last month, in principle, is not surprising. It is in the last month that more and more criticism has fallen on Donald Trump, and his name is no longer associated with the prosperity of the country. Moreover, as the proverb says, "there is no smoke without fire", and recently we have more and more often become witnesses of smoke that can come from under the trade agreement between Beijing and Washington. Plus, do not forget that in the United States, "coronavirus" continues to spread. Recently, a record number of cases of the disease was recorded in 8 states, so there is no question of suppressing the epidemic now. Moreover, the very topic of "coronavirus" has disappeared from the front pages of periodicals in the United States. Anthony Fauci no longer speaks, and Donald Trump himself does not touch on the topic of "coronavirus", probably realizing that this topic does not benefit him at all. But Trump happily began his campaign tour of American cities, ignoring all the warnings of doctors. However, as we wrote earlier, Americans are not all ready to blindly follow the calls of Trump and most of them are people who are afraid of the COVID-2019 virus. Moreover, quite a large part of Americans are not going to risk their health and the health of their loved ones to see their president firsthand. In the American city of Tulsa, Oklahoma, where Trump held his first campaign rally, the stadium, which is designed for 19 thousand seats, was filled by about a third. "Tomorrow we will have a wild night in Oklahoma," the president promised before the rally. "Wild evening" didn't work out. It turned out to be a "sad evening". Trump's headquarters, which claimed that more than a million requests to attend the event were received, disgraced the whole world and urgently had to get out of it, saying that the low turnout was due to "Black Lives Matter" protesters who allegedly blocked the roads to the stadium. And from all that happened in Tulsa, we can draw several conclusions. First, the protesting Americans are against Trump. If, as representatives of the American President's staff say, they blocked access to the stadium. And there are a lot of protesters in America. Secondly, the Americans were not particularly eager to support their leader even without the protesters, since their health is much more important. Third, a whole movement called "don't go to a Trump rally" has been launched on the Internet. People left requests for access to the stadium, not intending to go there at all. The "cherry on the cake" was the information that everyone who went to the stadium was forced to sign a paper about the absence of claims against Trump in the case of COVID-2019 disease.
No major events or news are scheduled for Wednesday, June 24 in the UK and the US. There will only be a hearing of the report on inflation in Britain, but inflation itself does not play any significant role now. Thus, tomorrow will be an empty day in terms of macroeconomic and fundamental events. Unless Donald Trump or other White House officials come up with new surprises. And they clearly can.
The average volatility of the pound/dollar pair continues to remain stable and is currently 120 points per day. For the pound/dollar pair, this indicator is "high". On Wednesday, June 24, thus, we expect movement within the channel, limited by the levels of 1.2395 and 1.2634. A reversal of the Heiken Ashi indicator downwards will indicate a possible resumption of the downward trend.
Nearest support levels:
S1 – 1.2451
S2 – 1.2390
S3 – 1.2329
Nearest resistance levels:
R1 – 1.2512
R2 – 1.2573
R3 – 1.2634
Trading recommendations:
The pound/dollar pair broke the moving average line on the 4-hour timeframe. Thus, today, continue buying the pound/dollar pair with the goals of 1.2573 and 1.2634 and keep the longs open until the Heiken Ashi indicator turns down. It is recommended to sell the pound/dollar pair not earlier than the reverse consolidation of quotes below the moving average with the first goals of 1.2451 and 1.2395.
The material has been provided by InstaForex Company - www.instaforex.com