4-hour timeframe
Technical details:
Higher linear regression channel: direction - sideways.
Lower linear regression channel: direction - downward.
Moving average (20; smoothed) - sideways.
CCI: -82.5985
The British pound, paired with the US dollar, was fixed above the moving average line on the 4-hour timeframe. Thus, the trend has now changed to an upward one. Formally – because a couple of weeks ago, the moving average was already overcome by the price, but then the downward movement resumed anyway. Recall that for the pound/dollar pair, we also expect the formation of a new downward correction turn on the 24-hour timeframe. On the 4-hour timeframe, we expect a continuation of the downward movement to the area of 1.3600-1.3666. It may not happen immediately, but this is a prospect for the next couple of weeks. At the same time, we also remind you that the recent strengthening of the US currency in the current conditions looks a little accidental. Recall that the downward movement of quotes began after the Fed meeting when no important decisions were made. The only thing that was heard was the phrase - "the regulator may start negotiations on curtailing the quantitative stimulus program in the near future." It was after that that the US dollar rose by 310 points. And after that, he managed to add another 55 points. Thus, from our point of view, the fall in the pair's quotes may end before reaching the area of 1.3600-1.3666, where the previous local minimum of the pair is located on the 24-hour timeframe. In this case, the bulls need to keep the pair above the moving average, then they can count on connecting new buyers to the emerging upward trend.
As we have already said, the number one topic in the UK is now the spread of the "coronavirus". Many people call what is happening now in the Foggy Albion the "fourth wave". Indeed, at least 20 thousand cases of the disease are recorded every day, and among them, there are also cases of infection with the "Indian" strain, which is considered more contagious and more resistant to existing vaccines. And at the same time, the Prime Minister of the countries, Boris Johnson, said that plans to lift all quarantine restrictions remain in force and he hopes that on July 19 the country will completely get rid of the shackles of quarantine. According to Boris Johnson, the British government expects that the spread of the "coronavirus" and its new strains will be stopped by vaccination of the entire population of the UK. At the moment, 86% of the adult population has already received at least one dose of the vaccine. Thus, in the next month and a half, the entire population of the UK can be fully vaccinated. However, it is not yet known for sure whether new strains of the virus can infect massively people who have already been vaccinated. As we have already mentioned in the article on the euro/dollar, the Israeli Ministry of Health made a statement that one of the most effective vaccines in the world, from Pfizer, showed a decrease in effectiveness in countering the "Indian" strain to 64%. However, the British government does not consider the pessimistic scenario of the spread of the COVID delta variation, and even 20-30 thousand new cases of the disease daily do not frighten it. Already on July 19, the country is going to cancel the mandatory wearing of masks, as well as the rules of social distancing. However, Boris Johnson did make one remark. On July 12, the British government will make a final decision on the lifting of the quarantine, so the restrictions can still be extended if, for example, the number of cases continues to grow at a rate of 20-30 thousand per day or higher. According to Johnson, now is the most favorable time to "open up": "If we can't reopen all the facilities within the next few weeks when our assistants will be on summer and school holidays, then we need to ask ourselves: when will we be able to open at all?". We also remind that the second semi-final and the final of EURO 2020 will be held in London in the near future, and the stands at these matches can be filled, as the British authorities have announced. Even Angela Merkel expressed concern about this since the increase in cases of diseases in the UK coincided with the holding of EURO 2020 (although not all matches were held on the territory of the Kingdom).
Meanwhile, Brussels has again stated that if London continues to violate the provisions of the Brexit agreement and, in particular, the provisions of the "Northern Ireland Protocol", it will have to go to court. It was stated by the deputy chairman of the European Commission, Maros Sefcovic. "The measures taken by the British government in March were unilateral in nature and contradicted the spirit of joint actions, and also went against what we agreed on earlier," Sefcovic said. "In response, we were forced to initiate a trial procedure for all the violations identified. If the UK does not take any steps to eliminate these problems, we will have no choice but to proceed with the trial," said Deputy Ursula von der Leyen. Earlier it was reported that back in March of this year, the European Commission launched a special legal procedure, which is the first stage or a springboard for future legal proceedings with the UK. However, all this time, Brussels hoped that London would come to its senses and sit down at the negotiating table to settle all differences. However, there were no such steps on the part of the British authorities, so now Brussels once again reminds London that it will not simply observe a unilateral violation of the agreements from the outside.
It is difficult to say whether all this news will be able to put pressure on the position of the British pound? Probably not right now. But if the fourth "wave" of the pandemic begins in the country, this will naturally affect the pace of economic recovery, as well as many macroeconomic indicators. The same applies to the conflict with the European Union. If the trial begins, London may be required to pay a fine for violating the provisions, or sanctions will follow from Brussels.
The average volatility of the GBP/USD pair is currently 86 points per day. For the pound/dollar pair, this value is "average". On Wednesday, July 7, thus, we expect movement inside the channel, limited by the levels of 1.3697 and 1.3869. A reversal of the Heiken Ashi indicator upwards will signal a new round of upward movement.
Nearest support levels:
S1 – 1.3733
S2 – 1.3672
S3 – 1.3611
Nearest resistance levels:
R1 – 1.3794
R2 – 1.3855
R3 – 1.3916
Trading recommendations:
The GBP/USD pair resumed its downward movement on the 4-hour timeframe and consolidated back below the moving average. Thus, today it is recommended to stay in sell orders with targets of 1.3733 and 1.3697 until the Heiken Ashi indicator turns up. Buy orders should be opened if the price confidently overcomes the moving average, with targets of 1.3916 and 1.3977, and keep them open until the Heiken Ashi turns down.
The material has been provided by InstaForex Company - www.instaforex.com