4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - sideways.
CCI: 120.8321
The British pound sterling on Thursday, January 28, was trading below the moving average line for some time, after which it began a new round of upward movement, breaking the moving average once again. Thus, in general, the swing mode is maintained, when the pair is thrown from side to side. But at the same time, as we have repeatedly said, the upward trend remains. That is, in general, the pound sterling continues to rise in price and regularly updates the highs. And the technical picture remains the same.
We have repeatedly recently assumed that the US dollar has become cheaper in the last 10 months solely due to the combination of two factors. But two very important factors: "the collapse of the US economy in the 2nd quarter of 2020 – the injection of huge amounts of money into this economy as stimulus measures." Now it remains only to understand how the "coronavirus" and the vaccination process will affect the exchange rates in the future. And most importantly - on the dollar exchange rate. Recall the unwritten rule of the foreign exchange market: when a dangerous or critical situation arises, investors and traders try to transfer their money to the safest currencies or assets. For a long time, such "safe havens" were considered the Swiss franc, the Japanese yen, and gold. In recent years, the US dollar has also been considered such a currency. This explains the fact that in March last year when the COVID-2019 virus was assigned the status of a "pandemic", the US dollar rose by 8 cents in just two weeks. However, this is paired with the euro currency. Both before and after this period, the US dollar became cheaper. But in general, since the beginning of the pandemic around the world, the dollar has risen in price in the first month and a half. Paired with the pound, things were even worse. The US dollar rose by 17 cents in the same two weeks and only then began a long process of decline of the US currency. Therefore, many people are now interested in the question of whether to repeat the scenario of the last March? The reasons given are some problems that have already begun to arise at the first stage of vaccination, the inability of companies that produce the vaccine to cope with huge orders, new strains of "coronavirus", which may not be affected by some vaccines, as well as the"business factor". It is the latter factor that seems most dangerous to us. The fact is that many countries of the world (of course, mainly developed and technological) have announced the creation of a vaccine. However, there are vaccines from world-famous manufacturers like Pfizer, and there are vaccines created in laboratories that no one in the world knows anything about. Therefore, at the moment, there are 4 or 5 recognized vaccines in the world. Now imagine how much money will be swirling around these companies in the coming years if they need to produce at least a few billion doses of the vaccine? Billions! It will be a battle between several pharmaceutical companies for hundreds of billions of dollars. At the same time, many scientists and epidemiologists have repeatedly stated that the process of creating a vaccine is very long. That even if the vaccine itself is created, it may take several years to conduct all the necessary clinical trials to understand how safe it is for all categories of citizens. In our case, we are talking not only about different categories of the population of a particular country or group of countries. We are talking about different races and peoples. Roughly speaking, the people of South Africa are different from the Eskimos or the inhabitants of the North. The vaccine may have different effects on them. For some, it may be useless, for others – dangerous. However, it is unlikely that anyone conducts clinical trials on all races of humanity. Moreover, pharmacists have also stated that some side effects may occur after a few years. Naturally, no one has conducted such tests to identify such side effects. Accordingly, potentially all vaccines can "face" humanity in 5-10 years with new problems.
And do not forget that not all of the world's population wants to be vaccinated and can afford it. For residents of European countries, it is not a problem to pay 20-30 dollars for vaccination. But for residents of African countries - this can be a serious problem. Even greater may be the problem of people's skeptical attitude to the virus itself and, accordingly, the lack of desire to be vaccinated. In general, we believe that even if the right amount of vaccine is produced, this does not mean that absolutely the entire population of the planet will be vaccinated in a year or two. Therefore, the "coronavirus" can cause huge problems for many years to come.
So, theoretically, if there are problems with the vaccination process, or after a few months it turns out that the vaccines do not work as they should, or simply have a lot of side effects, this can lead to a new panic in the markets and a new strong strengthening of the US currency against all its competitors. Of course, for this to happen, you will need very good reasons. But if something happens, you also need to be prepared for such a scenario.
In the meantime, the US dollar paired with the pound sterling continues to fall in price. At the same time, if the euro currency has at least slightly adjusted down, then the British currency continues to grow steadily in the "swing" mode. The pair is not moving away from its 2.5-year highs, so there is no reason to assume the end of the upward trend. Accordingly, trading should still not increase, but in the "swing" mode, it should be noted. It is very inconvenient to do this.
The average volatility of the GBP/USD pair is currently 105 points per day. For the pound/dollar pair, this value is "high". On Friday, January 29, thus, we expect movement within the channel, limited by the levels of 1.3635 and 1.3845. The reversal of the Heiken Ashi indicator downwards signals a new round of downward movement within the "swing".
Nearest support levels:
S1 – 1.3702
S2 – 1.3672
S3 – 1.3641
Nearest resistance levels:
R1 – 1.3733
R2 – 1.3763
R3 – 1.3794
Trading Recommendations:
The GBP/USD pair on the 4-hour timeframe began a new round of upward movement within the framework of the continuing "swing". Thus, today it is recommended to trade downwards with the targets of 1.3702 and 1.3672 if the pair makes a rebound from one of the levels of 1.3763 or 1.3794. It is not recommended to consider buy orders near 2.5-year highs.
The material has been provided by InstaForex Company - www.instaforex.com