4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - sideways.
Moving average (20; smoothed) - sideways.
CCI: 61.1506
The British currency has been correcting for a week and a half, and now it shows with all its appearance that it wants to resume and continue the long-term upward trend. On the 4-hour timeframe, the pair's quotes broke the moving average line, which is the first step on the way to forming a new upward trend. Thus, the pound managed to correct by as much as 450 points within the upward trend of 1550 points (the last five-month period). We have repeatedly asked the question, and what in general led the pound to such high price values? The factor of pouring huge sums into the US economy has not been canceled, however, the number of problems that exist in the UK should have at least slightly offset this factor. Moreover, the same European currency in the first two months of 2021 was adjusted and showed quite decent correction sizes, however, the pound was adjusted for a tick and now intends to resume growth, although in Britain problems are becoming more and more day by day. Thus, we also continue to conclude that the 40% growth of the British currency in the last six months depends on the "speculative" factor, and the pound sterling can be renamed the "pound of bitcoins". At least in the nature of the movement, the pound and bitcoin are very similar recently.
By the way, starting from January 4, 2021, when the pound continued to grow as if nothing had happened, the yield on British government bonds also began to rise, the level of which eventually rose from 0.2% to 0.8%. The pound, however, did not notice this. In addition to a whole mountain of economic and geopolitical problems, the British currency does not notice the growing national debt of the UK. At the same time, if for the United States such a phenomenon as an inflating national debt is in the order of things, then for the countries of Europe, it is not. The British government continues to raise funds through borrowing, through the inclusion of the printing press, in general, everything is as it is everywhere in the world now. But the total amount of government borrowing in the 2020 financial year has already exceeded the value of 2019 by 222 billion pounds. Experts predict that government borrowing could rise to almost $ 400 billion by the end of March 2021 (when fiscal 2020 ends). And, most likely, the debt will continue to grow, as the budget for the 2021 fiscal year is again in deficit and requires huge injections into the economy as stimulus and support programs. Not so long ago, British Finance Minister Rishi Sunak said that the programs to support business and save jobs will be extended until at least September 2021. And at whose expense? Taxes in the UK were not raised. Where does the additional cash flow come from? Especially now, when the country has just left the EU and objectively suffered the most from the "coronavirus" and "lockdowns" in Europe. So, no matter what Boris Johnson says, no matter what optimistic forecasts Andrew Bailey gives, more and more realistic figures and indicators continue to speak in favor of the fact that the British economy will recover with a big creak. And the government's debts will continue to grow, as the economy in the fourth quarter of 2020 and the first of 2021 will show either minimal growth or decline. At the moment, the total public debt of the UK is almost 100% of GDP. Recall that according to various international standards, the size of the national debt exceeding 100% of GDP is almost critical, and the country itself is almost in a pre-default state. For example, Greece in 2012 was forced to declare a default with the size of the national debt of about 160% of GDP. Of course, in some ways, there are extenuating circumstances now, since the whole world has been struggling with the epidemic over the past year. However, the pandemic only exacerbates economic problems and does not solve them in any way. They will have to be addressed by governments, many of which are no longer considering other solutions to the problems, except for the inclusion of the printing press.
Thus, the totality of all the British problems would have to put a lot of pressure on the pound. But instead, we see the continued long-term growth of this currency. From this, we can only draw one conclusion: the British currency is growing not based on fundamental factors, not based on macroeconomic statistics. Therefore, it makes no sense to predict its further movement using standard analysis methods. It is best now to track changes and assess the situation based on technical analysis, which best visualizes what is happening in the market. If the price holds above the moving average, then the upward movement will have a higher priority, so that "foundation" and "macroeconomics" do not signal there now. Recall that on the 24-hour timeframe, the quotes of the pound/dollar pair barely overcame the critical Kijun-sen line (the Ichimoku indicator), but today or tomorrow they can consolidate back above it. In general, the pound remains true to itself. Over the past 5 months, there has not been a single strong and complex correction that would exceed 450 points.
The average volatility of the GBP/USD pair is currently 109 points per day. For the pound/dollar pair, this value is "high". On Thursday, March 11, therefore, we expect movement within the channel, limited by the levels of 1.3802 and 1.4020. A reversal of the Heiken Ashi indicator downwards may signal a new round of downward movement.
Nearest support levels:
S1 – 1.3855
S2 – 1.3794
S3 – 1.3733
Nearest resistance levels:
R1 – 1.3916
R2 – 1.3977
R3 – 1.4038
Trading recommendations:
The GBP/USD pair continues its upward correction on the 4-hour timeframe. Thus, today it is recommended to open sell orders with targets of 1.3855 and 1.3802 if the price is fixed back below the moving average line. It is recommended to consider buy orders with targets of 1.3977 and 1.4020, as the price is fixed above the moving average.
The material has been provided by InstaForex Company - www.instaforex.com