4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - downward.
CCI: -113.6426
The pound sterling, as well as the European currency, fell down against the US dollar. Thus, we continue to conclude that the reasons for the strengthening of the US currency should be sought in America, and not anywhere else. In the UK, there has been no interesting news in the last few days. Last week, we already talked about the fact that the growth of the pound in recent months was similar to the growth of bitcoin. That is, the currency is growing, but there are no visible reasons for its growth. Most likely, the growth of the British currency in the last five months was triggered by an increase in the money supply in the United States and a "speculative" factor. However, even for these reasons, the pound showed excessive growth. Thus, in the case of the pound sterling, the picture is now extremely confusing. The pound/dollar pair shows a synchronous fall with the euro/dollar pair. However, on Monday, the pound was still slightly corrected up and did not update the local minimum. But the euro continued to decline during the day. What does this mean? Is the pound preparing for a new surge to the top? The most interesting thing is that there is now a reason for a new round of the dollar's fall. We have already talked about it in our recent reviews. This reason is the approval by the US Congress of a new $ 1.9 trillion stimulus package. Thus, in the coming weeks, new billions of dollars may pour into the US economy, which may provoke a new fall in the US currency. However, trading on fundamental hypotheses is still not recommended. Over the past year, traders have reacted very selectively to macroeconomic statistics and the "foundation". Thus, it is hardly possible to draw a conclusion about the prospects of the pair based on the fundamental factor alone. Therefore, it is still necessary to combine the foundation with the equipment.
While the British currency continues to grow (in the long term), the UK continues to suffer because of Brexit and the pandemic. We have already written earlier that at the end of January, the Association of Carriers of Great Britain announced a drop in trade turnover with the European Union by 69%. Even before December 31 last year, many companies left the UK, closed factories on their territory, or moved everything that could be moved to other countries. With the arrival of the new year, 2021, which for the Kingdom is already under the auspices of full independence, nothing has changed for the better. The fact is that now we are not talking about financial losses, but about human losses. Last year, about 700,000 people left the country, and this is data only for London. We are talking about emigration, as well as the outflow of foreign workers. Some experts believe that such a massive outflow of labor can cause its deficit and the loss of some industries and, as a result, taxes for the state. Recall that according to the latest estimates, due to Brexit and the pandemic, the government of Boris Johnson needs to raise taxes in order to get a total of about 70-80 billion pounds. It will be harder to do this if the labor force also leaves the country. After all, we are not talking about the disabled population, but about the workers. Although, on the other hand, in the UK, a strong increase in unemployment is predicted in the coming months, so perhaps these two processes will cancel each other out. But hardly anyone will deny that unemployment and the outflow of labor are two minuses, and not leveling each other plus and minus. Thus, +1.0% of GDP in the fourth quarter instead of minus is not too happy. But -9.9% of GDP by the end of 2020 is extremely frustrating.
The only pleasing data from the UK is the vaccination of the population, which is really going very fast. The other day, Boris Johnson reported on 20 million vaccinations made to British citizens. According to this indicator, the country is among the Top 5 countries in the world. Also earlier, the British Prime Minister announced that starting from March 8, the quarantine in the Foggy Albion will begin to weaken. Meanwhile, many experts continue to draw attention to the fact that Boris Johnson may benefit from the coronavirus pandemic. The fact is that the British Prime Minister would have to answer for Brexit and its consequences. And the economic consequences threaten to be extremely strong, even despite the trade agreement with the European Union. Recall that according to the calculations of the European Commission, the UK will not receive an additional 2.5% of GDP due to Brexit. Public debt due to various types of borrowing during the pandemic rose to almost 100% of GDP, which is one of the highest values in the entire history of the country. However, now Boris Johnson has a great opportunity to write off all the economic failures due to Brexit and the pandemic. Although the British government could have handled the pandemic much better, it is still a pandemic that the whole world has faced and all countries have suffered. And now Britain is in the lead in vaccination, so the pandemic and its consequences are likely to forgive Johnson. And under the guise of a pandemic, it will be possible to write off the huge financial losses that actually relate to Brexit. But it's all lyrics. The pound continues to grow in the long run. Consequently, all the problems of the UK are still not of interest to traders. If the new growth of the money supply in the United States will be the same reaction as in 2020, then all the British problems can be ignored for a long time.
The average volatility of the GBP/USD pair is currently 128 points per day. For the pound/dollar pair, this value is "high". On Tuesday, March 2, therefore, we expect movement within the channel, limited by the levels of 1.3786 and 1.4042. A reversal of the Heiken Ashi indicator back to the top will signal a new round of upward correction.
Nearest support levels:
S1 – 1.3916
S2 – 1.3855
S3 – 1.3794
Nearest resistance levels:
R1 – 1.3977
R2 – 1.4038
R3 – 1.4099
Trading recommendations:
The GBP/USD pair resumed its downward movement on the 4-hour timeframe. Thus, today it is recommended to stay in the sell orders with the targets of 1.3855 and 1.3794 until the Heiken Ashi indicator turns up. It is recommended to consider buy orders with targets of 1.4038 and 1.4099 if the price is fixed above the moving average line.
The material has been provided by InstaForex Company - www.instaforex.com