The British pound has also been correcting over the past week. However, the downward movement of the pound/dollar pair looks much more modest on the 24-hour timeframe than the euro/dollar pair, although it has passed more points down. It's all the fault of the previous upward movement, which did not stop for 5 months, and the illustration clearly shows that during these five months there was not a single significant correction. A couple of kickbacks was all the bears could do. Thus, the current drop in quotes looks like something special. Especially given the fact that it is still very difficult to explain fundamentally such a strong growth of the British pound over the past year. We have already said that the 40% upward movement was the result of a "speculative" factor. The pound grew because new investors constantly bought it for the reason that it was growing. A vicious circle. But we understand that the currency should not grow in the style of bitcoin. It should not grow simply because it is bought. Although the laws of supply and demand work, the currency is not a commodity. This is a means used for calculations, which in itself should not affect the value of a particular product. That is, in other words, currencies should be as stable as possible. But the pound has had big problems with stability in the last five months. Therefore, now it is even difficult to imagine what awaits the pound/dollar pair in the coming week. It seems that it also sank due to the growth of the yield of treasuries, however, if you again look at the chart and the five-month growth of the pair, then the current downward movement can be described as a banal technical correction. Thus, in the case of the pound sterling, the situation is excessively confusing and we recommend paying more attention to the technical picture of the hourly and 4-hour timeframes. Also, we should not forget that this weekend the US Senate approved a package of stimulus measures for $ 1.9 trillion, so in the near future, a new pile of money may flow into the economy, which again can affect the dollar exchange rate very unfavorably.
Next week, only the consumer price index for February can be distinguished from the macroeconomic statistics in the United States. In the UK, there will be no macroeconomic publications during the week at all, only the indicators of GDP and industrial production will be released on Friday. However, industrial production is unlikely to be of much interest to market participants, and the GDP report may show the strongest decline in January. And it should be understood that this reduction will be exactly in January. That is, at the moment, GDP for the fourth quarter is at a positive level of +1% q/q. However, thanks to January, which is expected to fall, this +1% may turn into a more logical "negative value". "More logical" because in the UK this winter there were as many as two "lockdowns" and only tomorrow, March 8, they will begin to weaken. Thus, three days out of five will be devoid of macroeconomic impact. However, as we have already mentioned in the article on the euro/dollar, it is quite possible that during the week, a strong influence on the US currency will be exerted by factors of growth in the yield of US treasuries and the potential growth of the money supply in the US due to the approval of the Senate of a new package of stimulus measures. Thus, as early as Monday, it will be clear in principle whether the bears are ready to continue pushing the pair down. We still believe that the US currency does not have bright prospects for 2021, however, it should be understood that this is the foreign exchange market. It has a huge number of participants, and there are a huge number of factors that affect a particular currency. Some factors are not even available to ordinary traders. Therefore, there are situations when a couple moves in a certain direction, and why it does this, no one can explain. Thus, you should always try to trade based on the totality of all available information and factors. You should never believe all the "100% forecasts". For the pound/dollar pair, these tips are now immensely relevant.
There has been no important news coming out of the UK lately. The country begins to gradually relax the "lockdown" and remove quarantine restrictions on March 8. The vaccination process is also continuing at a high rate, and as of March 7, 21.3 million people in the Foggy Albion have already received the first vaccination against the "coronavirus". The draft budget for 2021 has been agreed upon, businesses and the unemployed will continue to receive financial support until the entire adult population of the country receives its dose of the vaccine, and the economy does not get rid of the impact of a difficult epidemiological situation.
Trading recommendations for the GBP/USD pair:
The pound/dollar pair on the 4-hour timeframe has also started to move down and here it looks more impressive than on the 24-hour timeframe. At the end of the last week, the pair worked out the first support level of 1.3792 and is now thinking about what to do next. On the one hand, the current correction is very weak compared to the five-month period when it fell and grew. Thus, the "technique" speaks in favor of continuing the fall. But the "foundation" can prevent this, so you should keep in mind the possible reversal of the pair up and the resumption of a strong upward trend.
The material has been provided by InstaForex Company - www.instaforex.com