4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - upward.
CCI: 142.8430
The British pound sterling still broke the level of 1.3744 on the seventh attempt, which until recently was a 2.5-year high. Taking the acceleration from the Murray level of "1/8"-1.3580, traders still broke through the level of 1.3744. The same story already happened with the level of 1.3700. The bulls also tried to break it five or six times, and when they succeeded, they went up another 50 points and began to suffer already around the level of 1.3745. Thus, the main thing is not that local and 2.5-year highs were updated yesterday. The main thing is that the "swing" is preserved. This means that after updating the highs, the pair may well jump down by 200 points, and then return to the area of 1.3780-1.3800, then down again, and so on an infinite number of times. Therefore, it does not matter if the upward trend persists or not, it is important that trading the pound/dollar pair is still very inconvenient due to constant jumps.
Even though the fundamental and macroeconomic factors have long been not perceived by traders, formally, we can even conclude that the current, new strengthening of the British currency is quite logical and natural. First, the US dollar started a new fall in the pair with the euro. Thus, we can assume that it was the dollar that started the fall, and not the euro - the growth. If so, it is logical that the pound began to rise in price again. Secondly, earlier this week, it became known about the approval by the Congress and the Senate of a resolution on the budget in the United States, which allows you to vote for a new package of stimulus measures and pass it by a "simple majority". There is no doubt that 50 Democratic senators will vote in the Senate "for" Joe Biden's "plan to save the economy", and Kamala Harris will add 51 votes, which will eventually allow the new president to implement the plan. There is no need to talk about the lower house of Congress, where the new package of incentives will not get stuck since the majority in it are Democrats. Thus, this means that in the near future, the package for almost $ 2 trillion will be approved by the US government. Consequently, another 2 trillion newly printed dollars will be poured into the economy, and another trillion will be added to them, which did not have time to spend in 2020. And it seems that only this factor is now worrying traders of the pound/dollar pair. On the one hand, it turns out that everything is logical. The incentive package factor is global. But is it logical that everything that is happening will look like if we once again list all the problems of the British economy? Is it logical that traders ignore the 20% drop in the second quarter of 2020 (the US dollar played down its economy by 31%, and what about the pound?)? Is it logical that traders are ignoring the two "lockdowns" in the UK this winter, the last of which is not even completed yet? Is it logical that traders "forgot" about the recently completed Brexit? Is it logical that traders ignore the contraction of the British economy in the fourth quarter of 2020 and the first of 2021 (the US economy continues to recover, but the British one does not)? Is it logical that traders ignore the possible loss of Scotland in the coming years? Is it logical that traders ignore all of the above factors at once? From our point of view, not really. Thus, we believe that, unlike the European currency, the pound sterling is extremely overbought and is the first candidate for a serious fall in 2021. Moreover, the European currency has been correcting for the entire month of January and now quite rightly can continue the upward trend. For the pound, there was no tangible correction. There are so many negative factors in Foggy Albion that it will be enough for several countries. But traders continue to ignore all this information.
By the way, the poor "state of health" of the British economy is not just a hypothesis or assumption. Specific macroeconomic data from time to time confirm its poor condition. We have already talked about the GDP indicators. About the index of business activity in the service sector, which is below the level of 40.0. Yesterday, for example, it became known that the volume of exports to the European Union from the UK decreased by 70% in January 2021 compared to the same period last year. It is reported that due to the increasing bureaucratic processes in the registration of goods and the need for drivers to have health certificates when crossing the border, all the processes of crossing the borders of the UK are becoming more complicated and slow down. It is also impossible not to mention Brexit, which, even if there is a trade deal with the EU, still negatively affected the trade turnover between the Kingdom and the Alliance. And these are already concrete figures, and not assumptions and fortune-telling on coffee grounds. The government, by the way, did not confirm this information, preferring to focus the attention of British residents on positive news. For example, on the news that about 12 million people in the country have already received the first vaccination against the "coronavirus". Around 15 million of the UK's most vulnerable people are expected to be vaccinated by mid-February. By May, all residents over the age of 50 can get vaccinated. It is also reported that due to early orders for the supply of a vaccine against the "coronavirus", there are no problems with delays in vaccines in Britain. WHO has already suggested that the UK share excess doses of vaccines with countries that do not yet have them at their disposal. British Prime Minister Boris Johnson also said that the AstraZeneca and Pfizer vaccines help prevent deaths and severe forms of the disease. "We think that both vaccines are effective in preventing serious illness and death. We also think that in the case of the Oxford AstraZeneca vaccine, there is strong evidence that it also stops human-to-human transmission of the virus. I think we are talking about a 67% reduction in the risk of transmission of "coronavirus". They bring great benefits to our country and the population. Every day, medicine gradually takes over the disease," Boris Johnson said.
The average volatility of the GBP/USD pair is currently 82 points per day. For the pound/dollar pair, this value is "average". On Wednesday, February 10, thus, we expect movement within the channel, limited by the levels of 1.3714 and 1.3878. The reversal of the Heiken Ashi indicator downwards signals the beginning of a corrective movement against the upward trend.
Nearest support levels:
S1 – 1.3763
S2 – 1.3733
S3 – 1.3702
Nearest resistance levels:
R1 – 1.3794
R2 – 1.3824
R3 – 1.3855
Trading Recommendations:
The GBP/USD pair on the 4-hour timeframe is in a new round of upward movement within the framework of the continuing "swing". Thus, today it is recommended to trade for an increase with the targets of 1.3824 and 1.3855 before the Heiken Ashi indicator turns down. It is recommended to consider sell orders with a target of 1.3672 if the price is fixed below the moving average line.
The material has been provided by InstaForex Company - www.instaforex.com