What to say about the pound ahead of the new trading week? The pound/dollar pair has been in one place for three weeks. At the same time, it continues to be located near its 3-year highs, which preserves excellent chances for continuing the upward movement. As in the case of the euro/dollar pair, the bears show their exceptional weakness and even unwillingness to sell off the pound (the "speculative" factor). The British currency is still suffering from the disease of inability to adjust. Recall that during the entire upward trend, which began 15 months ago, the pound/dollar pair could adjust by a maximum of 500-600 points, although the entire trend already exceeds 2,700. So at this time, the quotes are unable to move away from their highs and start a downward correction. From our point of view, this means that the pound will continue to grow. The reasons for this conclusion remain the same. It may not even be about the traders themselves (although it is also about them). The US government and the Federal Reserve continue to stimulate their economy by trillions of dollars while increasing the money supply. Dollars are becoming more and more, and this process does not stop.
Therefore, the US currency is falling almost without stopping. And until the first process ends, the second process will not end. Last week's macroeconomic statistics finally had an impact on the pair's movement. The quotes fell by a hundred points on Thursday when a strong report from ADP was released. They rose by about the same amount on Friday when a weak report from NonFarm Payrolls was released. But what have these reports changed for the pound? By and large, nothing. Thus, next week, we continue to recommend paying attention to "macroeconomics." However, it should be remembered that it is unlikely that it will change anything globally for the pair.
What to look out for next week? In the UK, the statistics will only be published on Friday. On this day, it is planned to publish industrial production, GDP for the last three months, annual GDP, and trade balance. The forecast figures are very impressive. However, it should be remembered that they will be compared mainly with the disastrous spring months of last year when the UK economy was quarantined. For example, industrial production is projected to grow at an annual rate of 29-30%. But in monthly terms, the increase compared to March may be 1.2-1.5%. The numbers are completely different. The same applies to the annual GDP indicator. Compared to April last year, GDP may grow by 27-28%. But the three-month indicator indicates a possible increase of 1.2-1.6%. In general, we do not expect anything really impressive from the British statistics. But in the States, next week will be frankly boring. For the whole week, only inflation for May will be released from the important reports, which will continue to accelerate and amount to 4.7%. Core inflation is also forecast to rise to 3.2-3.4%. Another report on applications for unemployment benefits will be published. However, it has not caused any reaction recently. Thus, all the most interesting things will happen on Thursday and Friday. It does not mean that the pair will stand in one place with minimal volatility. However, a drop in market activity is certainly very likely.
There are no global fundamental topics either in the United States or in the United Kingdom. The markets are not interested in politics right now, so all those semi-scandals that Boris Johnson got into again do not interest traders too much. Vaccination continues at a good pace both in Britain and overseas. The economy is recovering both ways. The Bank of England and the Federal Reserve have not yet given specific terms and signals about their readiness to curtail the economy's program or raise the key rate. Yes, several representatives of the Bank of England said that with a high rate of recovery, the rate could be raised as early as next year. Andrew Bailey did not confirm this information in any way. Recall that the BA Monetary Committee has nine members. At least five people should vote "for" the rate increase. But five votes are unlikely to be collected in the near future. And in any case, the British economy is just beginning to recover from the crisis and all the quarantines. Thus, it makes no sense to think about tightening monetary policy earlier than next year. It is unlikely that the markets will now react to the Bank of England's actions in at least 7-8 months. And the British pound does not need any support right now. It's growing by leaps and bounds without it. We can only wait for when the markets will start repurchasing the pound or when the Fed will pour several new tranches into its economy.
Recommendations for the GBP/USD pair:
The pound/dollar pair on the 4-hour timeframe is stuck in one place, and it seems that it needs a powerful push now to move from its place. We believe that the pair will continue to move up in any case, and next week several interesting events may help it do this. It is especially true of the US inflation report. If it turns out that it continues to accelerate, then the markets are likely to perceive this information as a signal for new dollar sales. On the lower timeframes, we have an almost perfectly flat, so you should trade following it.
Explanation of illustrations:
Price levels of support and resistance (resistance/support) – target levels when opening purchases or sales. You can place Take Profit levels near them.
Ichimoku indicators, Bollinger Bands, MACD.
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