4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - sideways.
CCI: -49.4427
The pound/dollar pair is simply growing while the euro/dollar pair works out the technical picture, patterns, signals, and follow global fundamental factors. Bitcoin is getting more expensive on the tweets of Elon Musk. The shares of the game goods store GameStop are growing because its users agreed to buy them. The pound sterling is growing by 28 cents for 11 months for no particular reason, while before that it fell for 4 years by 33 cents for quite clear and objective reasons. These are the realities of 2020-2021. The British economy is suffering for the last 4 years, many companies are just leaving Albion. A trade agreement with the EU, signed literally "on his knees" for new year's table, does not affect the scope of services. A trade agreement with the United States may not exist at all, since Boris Johnson's friend Donald Trump - is no longer the president of the United States. The kingdom may lose Scotland in the coming years, the "coronavirus" has caused huge damage to the economy and it is still completely unclear what consequences will be left by the new COVID strains, which for some reason are found with enviable regularity in the UK. And with all this, the pound sterling manages to get more expensive. We remember that the money supply in the United States is growing in 2020 much stronger than in the UK. But there are far more problems in Britain than in the European Union. The euro has increased by 17 cents in the last 11 months. If the British pound, with all the problems of the UK, rose also by 17 cents, it would be logical. If the British currency were to adjust at least occasionally, there would also be logic to this upward movement. However, the pound has continued to grow for five months and during this time there has been no single significant correction. Rollbacks of 150-200 points do not count. Even the day before yesterday, when the pound/dollar pair fell by 150 points (by the way, it is also unknown why), many exhaled – now the long-awaited fall in the pair's quotes will begin. Already on Thursday, the upward movement was restored and the pair was again near its 2.5-year highs, which it updates almost every day. Various experts, many of them are world-famous or representing major banks and rating agencies, present high vaccination rates and market optimism about London avoiding the fate of a "hard" Brexit as possible reasons for such a strong growth of the British currency. However, where was the pessimism of the markets, when Michel Barnier and David Frost almost daily stated that there was almost no chance of a deal for 9 or 10 months? By the way, the same mantra was repeated by Ursula von der Leyen, Maros Sefcovic, and other representatives of the EU's top policy. At the same time, Boris Johnson flaunted the phrase that the UK is not afraid to leave the EU without a deal at all. The pound was growing a few months ago. In general, we still insist that the nature of the growth of the British currency is 60% of the factor of "pouring huge money into the American economy" (the money supply in the UK also grew by no more than 15% in 2020) and 40% of the speculative factor. By the way, it should also be remembered that for the last six months the Bank of England has been walking on the edge of the abyss in the issue of negative rates. They also complain that the European Union does not accept British financial companies with open arms.
By the way, there are no obvious dangers for the British economy. For example, in 2020, the country faced the highest level of public borrowing in peacetime. And by March 3, Finance Minister Rishi Sunak must submit a draft budget, in which it is not yet known whether there will be room for new programs to support businesses and citizens. If it is not found or the programs are significantly cut, then representatives of the private sector have already said that they will be forced to reduce their staff. Potentially, this could result in an increase in unemployment to 7.5%. This will automatically create a burden on the same budget, as you will have to pay more unemployment benefits, but the amount of taxes received will decrease. If the state aid and support programs are extended, this will be an additional cost. According to research by the Institute for Fiscal Studies, the UK authorities will have to raise taxes by 60 billion pounds to patch all the holes in the budget. Forecasts suggest that if the British economy recovers from the crisis and the three "lockdowns" slowly and sluggishly, the amount of government borrowing could grow by another 130-190 billion pounds and reach almost 400 billion pounds by the end of the 2020 financial year. In a positive scenario, it will reach pre-crisis levels of about 50 billion. But who now believes in optimistic scenarios? Citibank economist Ben Nabarro believes that the decision to introduce negative rates by the Bank of England is inevitable. The regulator will have to lower the cost of borrowing below zero and this may happen before the end of 2021. Thus, it is likely that the recovery of the British economy will be slow, and the monetary policy of the Bank of England will be relaxed even more. In general, the prospects for the British economy are still vague and this is still too soft an expression. But what's the difference between the pound and the pound buyers?
The average volatility of the GBP/USD pair is currently 120 points per day. For the pound/dollar pair, this value is "high". On Friday, February 26, thus, we expect movement within the channel, limited by the levels of 1.3935 and 1.4165. A reversal of the Heiken Ashi indicator back to the top will signal a possible resumption of the upward movement.
Nearest support levels:
S1 – 1.4038
S2 – 1.3977
S3 – 1.3916
Nearest resistance levels:
R1 – 1.4099
R2 – 1.4160
R3 – 1.4221
Trading recommendations:
The GBP/USD pair has started a new round of downward correction on the 4-hour timeframe. Thus, today it is recommended to open new long positions with targets of 1.4099 and 1.4160 in the event of a price rebound from the moving average. It is recommended to consider sell orders with targets of 1.3977 and 1.3935 if the price is fixed below the moving average.
The material has been provided by InstaForex Company - www.instaforex.com