4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - downward.
Moving average (20; smoothed) - downward.
CCI: -201.1752
On Thursday, the British pound paired with the US dollar also continued the downward movement that began the day before. However, there is one very remarkable moment in the movement of the pound/dollar pair. Everyone knows that the pound/dollar pair has always been much more volatile than the euro/dollar pair. So, after it became known that the Fed is preparing to start discussing the curtailment of the quantitative stimulus program, the pound lost less than the European currency. What is it? Is it just an accident, or does the "speculative factor" continue to work? Recall that in the last six months, many experts pointed out at that time that the pound is trading unnaturally high, heavily overbought, and at the same time can not fall in price.
Of course, many believed that several factors spoke in favor of the Briton, ranging from the high vaccination rate to the excellent prospects for its economy after Britain left the EU. From our perspective, these factors are "far-fetched" to explain somehow what is happening in the foreign exchange market. But the "speculative factor" explains the strong growth of the pound and its inability to yield to the dollar much better. We have already given an example of bitcoin regularly showing abnormal upward trends. After all, it is also very difficult to explain why the first cryptocurrency in the world is growing so much. Market participants buy it, so it is growing. Thus, something similar could happen with the British currency. And it can still happen now. A downward trend has formed, but the pound is still cheaper much less readily than the euro. Much of the fundamental background from the UK continues to be ignored, and traders continue to ignore several factors that could potentially harm the UK and its economy. Thus, it turns out that a few hints without announcing specific deadlines for tightening the Fed's monetary policy are enough for the dollar to start growing actively. But the possible loss of Scotland by the United Kingdom does not interest traders at all?
We should once again draw traders' attention to the fact that if it were not for the Fed meeting on Wednesday and its optimistic results, the pound/dollar pair would most likely continue to be in the "swing" mode. Recall that the quotes jumped up and down for a whole month, alternating movements of 100-150 points. The day before yesterday's Fed meeting allowed them to drop by 150 points and start talking seriously about the formation of a new downward trend. However, from our perspective, even such a strong decline in the pair's quotes does not indicate that a new trend will now begin. After all, what happened? The Fed raised its forecasts for GDP and inflation and lowered its forecasts for unemployment. They hinted at a possible rate hike in 2022 and said that discussions would begin on a possible curtailment of the quantitative stimulus program in the near future. The day before yesterday evening, the Americans worked out this information, and yesterday in the morning - by the Europeans and the British. Thus, so far, we can only talk about the local impact of the fundamental event on the movement of both major currency pairs. But whether the US dollar will be able to continue to grow remains a big question.
However, there is still some long-term support for the US currency in pair with the pound. First, there is again an increase in the number of "coronavirus" diseases in the UK. Of course, now the figures are not frightening. However, the quarantine restrictions in the country were extended until July 19 and hinted that they would be extended as long as the lives of British people are not in danger. Secondly, the UK's global problems have not gone away. There is still a conflict with the European Union, the possible loss of the Kingdom of Scotland, and an unclear future on the island of Ireland. Third, the pound is very much overbought, and everyone has been talking about it for a long time. Fourth, Boris Johnson continues to be targeted by his political opponents, who are launching the same war against him as the Democrats did against Donald Trump. Recall that Trump lost this war and left his name in the United States history as the least effective president. Despite the record number of people who voted for Trump in November 2020, most Americans voted against him. And Trump became one of the few American presidents who failed to be re-elected to a second term. The same fate may befall Boris Johnson. So far, his main victory is Brexit. And how many defeats, mistakes, and scandals were there?
The trade deal turned out to be not so attractive for the UK and does not consider the services sector, which the British needed the most. The Brexit agreement and especially the "Northern Ireland protocol," as it turned out in practice, works very poorly. London has already unilaterally violated some points of this agreement several times, which caused anger from the European Union and the threat to refer all violations to the Court. The figure of Boris Johnson is also associated with a huge number of scandals. Recently, financial questions have been raised about his expensive Christmas holiday on the private island of a Conservative Party benefactor and the expensive renovations to his Downing Street residence. And you can also remember how Boris Johnson blocked the work of Parliament to implement a "hard" Brexit and framed the Queen of Great Britain, who must accept all the proposals of the Prime Minister. And after some time, she had to cancel the blocking of the Parliament, as the Court ruled that this decision does not fit with the concept of "legality." How can we not remember the former adviser to Johnson, Dominic Cummings, who recently exposed several actions of the Prime Minister during the pandemic's critical moments and criticized the entire British government, pointing out a huge number of mistakes? By the way, just yesterday, Cummings showed a message from the WhatsApp messenger, in which Johnson swore at Health Minister Matt Hancock on March 26, 2020. That is, at a time when the epidemic was raging in Great Britain and at a time when, according to Cummings, the British government showed itself completely incompetent and unprepared for critical situations.
The average volatility of the GBP/USD pair is currently 101 points per day. For the pound/dollar pair, this value is "average." On Friday, June 18, we expect movement within the channel, limited by the levels of 1.3835 and 1.4037. The upward reversal of the Heiken Ashi indicator signals a round of upward correction.
Nearest support levels:
S1 – 1.3916
S2 – 1.3885
S3 – 1.3855
Nearest resistance levels:
R1 – 1.3916
R2 – 1.3947
R3 – 1.3977
Trading recommendations:
The GBP/USD pair continues a strong 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 1.3835 until the Heiken Ashi indicator turns up. Buy orders should be opened if the price is fixed above the moving average, which is now very far away.
The material has been provided by InstaForex Company - www.instaforex.com