4-hour timeframe
Technical details:
Higher linear regression channel: direction - sideways.
Lower linear regression channel: direction - downward.
Moving average (20; smoothed) - downward.
CCI: -71.3489
The British pound, paired with the US dollar, resumed falling on Thursday. It is contrary to the European currency, which grew slightly during the day. However, in general, both pairs are now in a downward trend. At this time, it is impossible to single out a list of specific reasons why the US dollar is growing and why the euro and the pound are declining. From a technical point of view, everything is quite logical, since the upward trend that has been going on for a year and a half is visible on the 24-hour timeframe (or older). Therefore, corrections are necessary from time to time. So why not now? Therefore, why not make corrections in several waves? Thus, we still assume that both major currency pairs will continue to fall. The pound is in the area of 1.3600-1.3666. In principle, there are only about 100 points left to go to this area. As for the fundamental reasons for the strengthening of the US dollar, they can only be invented. In the literal sense of the word. Only a powerful and rapid recovery of the American economy speaks in favor of the US currency now. However, it was the same three months ago. It has long been clear to everyone that the American economy is growing faster than the British and faster than the European one. Also, everyone understands why it is growing so fast. The national debt in the United States has already swelled to $ 30 trillion, and inflation has already risen to 5%. At the same time, the labor market has not yet recovered to the necessary pre-pandemic levels. Thus, the Fed cannot yet use weapons against the growth of consumer prices. Therefore, inflation may continue to grow in 2021. Thus, the fundamental grounds for further growth of the dollar look very doubtful. But here, as has often happened in the last 5 years, the British pound can come to the aid of the dollar.
Although the UK is one of the leaders in the world in the number of vaccinations carried out among the population, it is now also the leader in the number of new cases of the disease. Thus, the pound may experience additional pressure, since the current levels of morbidity already exceed the January values. The maximum number of new cases registered per day at the peak of the third "wave" was 68,000. Yesterday, 32,000 diseases were recorded in the UK, and at the same time, Boris Johnson is going to lift all quarantine restrictions in the country on July 19, and 100% of fans are allowed to attend the final matches of EURO 2020. Somewhere in Edinburgh, Nicola Sturgeon is rubbing her hands, already realizing that such actions of the British Prime Minister give her additional trump cards in the confrontation with London. Representatives of the Labor Party probably hold about the same opinion. Of course, Johnson can still postpone the lifting of all quarantine restrictions on July 12, when the British parliament will just make a final decision on this issue. Everything will depend on the foresight of the British prime minister. It's no secret that in a certain sense of the word, the pandemic was in Johnson's hands. Of course, it put additional pressure on the British economy, but at the same time, it allowed to mask all the negative consequences of Brexit and explain them with a pandemic. Now it is very difficult to understand which failures, collapses, and falls of economic sectors are associated with Brexit, and which with the pandemic? However, even now it cannot be said that Britain has embarked on the path of recovery and nothing will push it off it. First, as we have already found out, the "fourth" wave of the epidemic has already begun in the UK. And given that several vaccinated people have already died from the Indian strain of the "coronavirus", no one can predict the results of this "wave" now. Moreover, a new surge of diseases is also expected in the European Union. Secondly, experts agree that the negative effect of Brexit on the UK will have a long-term impact. For example, The Financial Times reports that about 30% of British companies after Brexit began to lose profits and approach unprofitability. Many enterprises have faced a violation of supply chains with EU countries, so they incur additional costs and expenses. About 20% of British companies have completely severed relations with European partners and suppliers. Now, according to the journalists of The Financial Times, it's time for the UK to show how right it was to sacrifice the European market for the sake of sovereignty. At the same time, experts continue to note that European and British businesses continue to move away from each other and separate. British manufacturers are forced to look for new markets that are not able to fully absorb the entire supply of goods. Experts also note that trade agreements with other countries, to which the current government was so eager, still sound beautiful. The deals with Japan and Australia are very small in monetary terms and cannot compensate for the losses associated with leaving the EU. In addition, there is no "smell" of a trade deal with America yet, and the calls of the head of the Ministry of Finance, Rishi Sunak, to trade with China cause indignation on the part of Britain's main allies. Most of the experts eventually stop at the opinion that Britain will still have to put up with the European Union and try to find a way to get along with the bloc since these are still the closest neighbors and it would be unwise to protect them from themselves. At the same time, in this case, the UK will have to make concessions to the European Union, since Brussels has repeatedly made it clear that "there is no EU membership – there is no access to the European market and all privileges." But so far, Boris Johnson's government is more in conflict with Brussels. Therefore, the next government may establish trusting relations with the EU.
The average volatility of the GBP/USD pair is currently 87 points per day. For the pound/dollar pair, this value is "average". On Friday, July 9, we expect movement inside the channel, limited by the levels of 1.3689 and 1.3863. A reversal of the Heiken Ashi indicator upwards will signal a new round of upward correction.
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 continues its downward movement on the 4-hour timeframe. Thus, today it is recommended to stay in sell orders with targets of 1.3733 and 1.3689 until the Heiken Ashi indicator turns up. Buy orders should be opened if the price confidently overcomes the moving average with targets of 1.3855 and 1.3916, and keep them open until the Heiken Ashi turns downward.
The material has been provided by InstaForex Company - www.instaforex.com