4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - upward.
CCI: 146.3113
If the European currency was still making sluggish attempts to start correcting, the pound continued to grow strongly all this time without any signs of correction. The pound ignored the Fed's meeting the day before yesterday as if it was a meeting of the Central Bank of Zimbabwe and had nothing to do with the pound/dollar currency pair. Thus, despite the fact that there was nothing optimistic for the US currency at this meeting, and the US dollar had every reason to continue falling, we believe that traders of the GBP/USD pair simply continue to ignore the entire macroeconomic background. Given the fact that no optimistic macroeconomic or fundamental background is currently coming from the Foggy Albion, the conclusion is self-evident: market participants continue to pay great attention to the "coronavirus" pandemic in the United States, the strongest economic, political and social crisis in this country. There can be no other explanation for why the British pound is growing.
On Thursday, the UK again did not publish any macroeconomic reports. Thus, all the attention was on the United States where the second-quarter GDP was expected to be published. The figure announced by the Bureau of Economic Analysis is hardly optimistic, however, it is still slightly better than forecasts. -32.9% q/q/. Market participants expected to see from -34% to -35%. On the one hand, the value is still depressing, on the other – it is still better than the forecasts, and on the third – traders did not care that the forecasts were even worse. The British pound rose again. Other reports from overseas were no longer important. However, the number of new primary applications for unemployment benefits for the reporting week was 1.434 million, and the total number of secondary applications (real unemployment) – 17 million and increased compared to the value of a week ago by 800 thousand. Thus, first, we can conclude that the real unemployment in the country is higher than Jerome Powell believes, and second, it also has a tendency to grow in recent weeks, which can not be attributed to a sharp increase in coronavirus diseases. If this connection is really present, then a new period of decline may come for the American economy, instead of the "rapid and powerful recovery in the third and fourth quarters" that Donald Trump promised.
Meanwhile, in the White House, something happened that the most ardent skeptics of Donald Trump's rule have long been waiting for. The American President via Twitter proposed to postpone the presidential election in 2020 because of the "coronavirus" epidemic and fears that the vote "by mail" will be inaccurate and fraudulent. "This will be a disgrace to America," Trump wrote. As usual, the American President did not say why he believes that the election by mail will be "fraudulent", especially given the fact that according to all the latest opinion polls and research, it is he who is significantly behind Joe Biden and if anyone is interested in election fraud, it is he himself. However, Trump advocates that American voters should be able to vote "correctly, reliably and safely". In fact, Trump's most ardent opponents spoke about this proposal a few months ago. A lot of opposition forces in the United States expect Trump to play foul in the election or try to postpone the election itself. As we can see, the president started from afar, voluntarily offering to postpone the election for an indefinite period. Clearly, time is playing against Trump right now. If the US leader was given at least another year, it is likely that during this period, a cure for COVID-2019 would be found, and the economy would at least be able to revive. And now, with three months remaining before the election, it is almost impossible to do this. Especially given the current levels of coronavirus contamination in the United States. Thus, we expect the continuation of the "marleison ballet" under the title "Trump and the election" in any case. It is obvious that this story will have a very interesting sequel, that's just whether it will be beneficial for the American economy and the dollar?
Meanwhile, the number of victims from the "coronavirus" in the United States has exceeded 150,000. Well, Donald Trump at a regular briefing in the White House said the following: "I believe in hydroxychloroquine. I used it. Many, many people agree with me." A curtain. To be honest, we once again do not know how to react to such a statement by the US leader. The country's chief infectious disease specialist and epidemiologist, Anthony Fauci, has repeatedly denied the effectiveness of hydroxychloroquine (a drug for malaria) as a treatment for COVID-2019. "Most clinical trials that have studied the effectiveness of hydroxychloroquine have shown that it is ineffective in coronavirus," Fauci said. At the same time, Twitter banned Trump Jr. for posting a video in which some doctors recommended the use of hydroxychloroquine as therapy against "coronavirus." In general, the factory of the absurd continues.
Meanwhile, the pound continues to break all records, without ceasing to grow. On the last trading day of the week, only a few minor publications are planned in the US, and none at all in the UK. However, it will now be interesting to wait and see how much UK GDP will shrink in the second quarter of 2020. Recall that this indicator will be published on August 10 and assumes a decrease of 20.4%, which is also a lot. Thus, we still believe that trading the pound/dollar pair should only follow the trend, but also be prepared for the fact that this most upward trend can end at any moment, because the fundamental and macroeconomic picture in the Foggy Albion is no less depressing than overseas.
From a technical point of view, all indicators of the "linear regression channels" system are directed upwards, so there are no signs of a correction beginning at the moment. In any case, you should first wait for the quotes to be fixed below the moving average line, and only after that, you can consider the possibility of trading lower. There is no news about the negotiations on the Brexit agreement between London and Brussels at the moment, and there is no news about the "coronavirus" in the UK.
The average volatility of the GBP/USD pair continues to remain stable and is currently 110 points per day. For the pound/dollar pair, this value is "high". On Friday, July 31, thus, we expect movement within the channel, limited by the levels of 1.2953 and 1.3173. Turning the Heiken Ashi indicator downward will indicate a new round of downward correction.
Nearest support levels:
S1 – 1.2939
S2 – 1.2817
S3– 1.2695
Nearest resistance levels:
R1 – 1.3062
R2 – 1.3184
R3 – 1.3306
Trading recommendations:
The GBP/USD pair continues to move up on the 4-hour timeframe. Thus, today it is recommended to stay in purchases of the British currency with the goals of 1.3173 (the level of volatility on July 31) and the Murray level of "5/8" - 1.3306, before the reversal of the Heiken Ashi indicator downward. Short positions can be considered no earlier than fixing the price below the moving average with the first goal being the Murray level of "0/8" - 1.2695.
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