4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - sideways.
CCI: -63.6431
The British pound does not pay any attention to what is happening in the world right now. It continues to trade on its terms and continues to stay near its 2.5-year highs. In the article on the euro/dollar, we have already touched on the question of what makes the pound continue to stay so high. There is no clear answer. It is still possible to explain the general fall of the dollar in the last 10 months, but even the euro/dollar currency pair has already begun to correct. But not the pound. For the British currency, the "swing" mode is maintained, the pair constantly jumps up and down. It is good that at least the volatility has decreased. However, in trading, reduced volatility does not help in any way. At least according to the "Linear Regression Channels" system, which is trending, like Ichimoku, it is extremely problematic to trade now. It is better to use lower timeframes and various graphical constructions in the analysis and forecasting. We also provide this type of analysis daily, and we recommend that you pay attention. In the meantime, let's get back to our upward trend and the extremely overbought pound.
At this time, it does not even make sense to analyze the fundamental background for the pound/dollar pair. If the euro is corrected and it fits into the concept of correction within an upward trend and a little bit goes well with the fundamentals, that is, in the case of the pound all the way around. The British currency simply continues to grow and at the same time ignores all the factors that could and should have affected it. Thus, it is the pound/dollar that remains the most difficult pair, from the point of view of forecasting, and the most inconvenient for trading.
Meanwhile, when the pound just spits on all the news and data, a new dispute arises between the UK and the European Union. This time because of the vaccines. In the UK, Oxford University has developed its vaccine, but either the production capacity is limited, or the vaccine is questionable, or the government wants to insure itself and have several vaccines at its disposal, but the country signed a contract a few months ago with AstraZeneca for the supply of a vaccine against the "coronavirus". Now, when this company delicately hinted to Brussels that it would be able to deliver only 40% of the vaccine to it within the terms stipulated by the contract, the European Union suggested that it refuse to supply it to the UK. The greatest unrest occurred on the Northern Irish border, which is now a window to Europe and back for Britain. At the end of last week, EU officials announced that they want to terminate the export control point on the border between Ireland and Northern Ireland. Brussels needed this to make sure that European pharmaceutical companies do not export the vaccine to Britain without fulfilling the terms of the agreement with the EU. The dispute was resolved very quickly, after all, there is a specific agreement between the parties, and for non-compliance with any of its points, an international court of justice, fines, sanctions, and so on will follow. However, the bell itself is quite alarming. "I think that the European Union has admitted that it made a mistake in trying to implement Article 16, which would mean a new border on the island of Ireland," British Minister Dominic Raab said. However, the debate is not only about the vaccine from AstraZeneca. The media report that the European Union wants to vaccinate the majority of the population as soon as possible, so it acts on the principle of "our first – then yours". Since the UK is no longer a member of the EU, Brussels sees no reason why the vaccine should be sent to the UK at a time when not all of the most vulnerable segments of the EU population have not been vaccinated. It is also reported that the EU government may block the supply of the vaccine to Britain by Pfizer/BioNTech, which are already purely European companies, but which also have a contract for the supply of the vaccine to the UK. In general, there may be some tension between the UK and the EU in the coming months.
Well, the British pound is waiting for something more global. At this stage, it is best to try to understand the question of how to identify the end of an upward trend. As we have already said, the pair is in a "swing" mode, that is, it is constantly rising and falling. And even after quite strong corrections (December 17-21 or December 4-11), the upward movement was still resumed. A higher timeframe will help us understand this. If you look at the 24-hour, you can see the almost recoilless upward movement. The pair have not managed to gain a foothold below the critical Kijun-sen line of the Ichimoku indicator in the last 4 months. Thus, as a support for the entire upward trend, we recommend using this line, which currently passes at the level of 1.3582. The specifics of the current movement is that it must constantly continue. There are no rollbacks, however, there should be constant updates of the local maximum. If this is not the case, then the trend is most likely completed. Therefore, fixing the price below the level of 1.3582 will be the first alarm bell for the pound. Well, on lower timeframes, the price can easily go down by 200-250 points, but at the same time maintain an upward trend. Therefore, the moving average line now serves as a very bad guide and it is not recommended to trade from it. But the linear regression channels clearly show the current trend and leave no doubt in which direction it is directed.
The average volatility of the GBP/USD pair is currently 110 points per day. For the pound/dollar pair, this value is "high". On Tuesday, February 2, thus, we expect movement within the channel, limited by the levels of 1.3568 and 1.3788. A reversal of the Heiken Ashi indicator to the top will signal a new round of upward movement within the "swing".
Nearest support levels:
S1 – 1.3672
S2 – 1.3641
S3 – 1.3611
Nearest resistance levels:
R1 – 1.3702
R2 – 1.3733
R3 – 1.3763
Trading recommendations:
The GBP/USD pair on the 4-hour timeframe began a new round of downward movement within the framework of the continuing "swing". Thus, today it is recommended to trade for an increase with a target of 1.3750 if the Heiken Ashi indicator turns up. It is not recommended to consider sell orders now.
The material has been provided by InstaForex Company - www.instaforex.com