4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - sideways.
CCI: -24.4627
The British pound continues to trade according to its own rules. The pound/dollar pair remains "highly volatile swings", which we have already written about more than once. Three unsuccessful attempts to overcome the level of 1.3700 led to a new round of downward movement. At the moment, the pair's quotes are once again fixed below the moving average line, so formally the trend has changed to a downward one. However, we have been observing a "swing" with a slight upward slope for several months. The pair during this time changed the direction of movement about three times, overcoming the moving average. However, there can be no classical testing in the current conditions. The pair changes direction too often. At the same time, it is even difficult to imagine what this is connected with. On the contrary, in 2021, there should have been some relaxation of market participants. Brexit is finally complete, a trade deal with the European Union is concluded. However, instead of calmer trading, we see an ongoing storm. Thus, the pair can easily go down another 150-200 points and then resume the upward movement and return to 1.3700, and can immediately resume the movement to the north on Monday.
As we said earlier, there is not much news from the UK right now. The greatest attention is drawn to the topic of "coronavirus". Quarantine remains in place in many states, however, there is no such panic or such a serious attitude to the pandemic. However, in Britain, there is really something to worry about. The country has seen a threefold increase in the number of cases in recent weeks. The country has identified a "British" strain, which is 50-70% more contagious than usual. The country is under quarantine in two senses of the word. Boris Johnson declared an internal "lockdown", and many countries of the world blocked all communication with the Kingdom to prevent the spread of just the same "British" strain. However, there is some good news. In recent days, the incidence rates have declined. In addition, Foreign Minister Dominic Raab said that the government plans to complete the vaccination procedure for the entire adult population of the UK by September 2021. It is also reported that almost 3.5 million Britons have already received the coronavirus vaccine.
At the same time, Scotland is strengthening quarantine measures in connection with the deterioration of the situation with COVID-2019. Scots are now prohibited from picking up ordered goods online by pickup, and all catering establishments are prohibited from letting visitors inside even to issue orders. People are asked not to leave their homes unless absolutely necessary. Perhaps this is all news from the UK. As you can see, they absolutely do not prevent the British currency from remaining near 2.5-year highs.
Meanwhile, in the United States, the future president of the country Joe Biden is not going to rest on his laurels for a long time and celebrate the victory. He is determined to start correcting Donald Trump's mistakes and developing the country as soon as possible. This was stated by the future head of the White House staff Ron Klein. He said that in the near future, Biden will sign about 10 decrees that will address the most acute, crisis issues, in particular, climate change, the fight against racial discrimination and the epidemic of "coronavirus". Klein also said that Trump in the first day of his presidential term intends to return the States to the Paris climate agreement.
But all this news now has no meaning for market participants. Unfortunately. As we said in the article on the euro/dollar, this greatly complicates and simplifies the process of analysis and forecasting. In the case of the pound, it is more difficult, because the technical picture here is complex and ambiguous. Thus, now, to predict the movement of the pound/dollar pair, you do not need a fundamental background, you do not need macroeconomic reports, and the "technique" on the 4-hour timeframe does not bring clarity. The only thing that can be done is to trade on lower timeframes with the search for more short-term trends. The movements that occur on the 4-hour timeframe are very fast, but on the hourly timeframe, they can form short-term trends that you can try to work out. Unfortunately, it is extremely difficult to make an assumption that can change the current situation in the market. If the euro/dollar currency pair moves at least more or less logically, from a technical point of view, then the pound/dollar moves absolutely chaotically and randomly. Thus, it is also not the worst solution to refuse to trade this pair for a while.
Also, traders do not pay any attention to the economic indicators of the UK and the US. We have repeatedly said that the British economy will suffer losses in the fourth quarter of 2020 and in the first quarter of 2021. Unlike the American one. This is confirmed by official figures and forecasts. However, this is also not taken into account by traders who continue to be nervous and at the same time buy the pound more than the dollar.
The average volatility of the GBP/USD pair is currently 120 points per day. For the pound/dollar pair, this value is "high". On Monday, January 18, thus, we expect movement inside the channel, limited by the levels of 1.3463 and 1.3703. The reversal of the Heiken Ashi indicator to the top signals a new round of upward movement within the "swing".
Nearest support levels:
S1 – 1.3580
S2 – 1.3550
S3 – 1.3519
Nearest resistance levels:
R1 – 1.3611
R2 – 1.3641
R3 – 1.3672
Trading recommendations:
The GBP/USD pair has started a new round of downward movement on the 4-hour timeframe. Thus, today it is recommended to trade lower with the targets of 1.3550, 1.3519 and 1.3489 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 is fixed above the moving average line.
The material has been provided by InstaForex Company - www.instaforex.com