4-hour timeframe
Technical data:
The upper channel of linear regression: direction - upward.
The lower channel of linear regression: direction - downward.
The moving average (20; smoothed) - sideways.
CCI: -78.5436
The GBP/USD currency pair resumed a slight downward movement after once again failing to start an upward trend. On the first trading day of the week, no important macroeconomic reports were published in the UK, and no important news or reports were received. The country is preparing for two extremely important events this week: the meeting of the Bank of England and the official start of Brexit. The first event is extremely important, as this meeting will be the last for the head of the Regulator, Mark Carney. Many people remember Mario Draghi, the ECB Chairman who resigned in the fall, who finally lowered the Deposit rate, believing that Mark Carney can also ease monetary policy before he leaves. However, in the balance of power in the vote on changing the key rate, the ratio is expected to be no more than 4 - "for", 5 - "against". Thus, from this point of view, it is probably not worth expecting a rate cut in January. Experts' opinions also differ. Many people note that the macroeconomic statistics in the UK have been reviving in recent weeks, but everyone understands that the growth of not the most important indicators is not a reason for refusing to take measures to stabilize the British economy. In general, the general opinion will most likely be as follows: the rate will be necessarily reduced either at this or the next meeting unless economic indicators start to grow sharply and unexpectedly.
The second event of the current week is Brexit. I don't even want to talk and write about it once again. So much has been said over the past three and a half years that now I just want to wait for it to start and see what happens next. One thing can be noted: in contrast to the occasional wave of optimism in the markets that the country is still leaving the EU, we believe that Brexit is only harming the British economy and will continue to have at least the whole of 2020 (the loss of another $ 70 billion), and what will happen in 2021, we do not even want to think about it yet. If Boris Johnson does not sign a trade agreement with Brussels or Washington, the British economy will simply continue to decline.
In the meantime, in confirmation of our words, information has arrived that London has ceded the status of a "world financial center" to New York. This is evidenced by the results of a survey conducted among the world's top managers. Only 34 percent of managers surveyed continue to consider London the largest financial center, while 56% preferred New York. It is also noted that back in 2018, it was London that retained this status, but the long negotiations on the "deal" on Brexit between the UK and the EU began to hit the UK economy, and London began to lose popularity. We believe that the country's future will now depend entirely on Johnson's ability to negotiate a new trade relationship with the EU that will be in place after 2020, after the end of the "transition period".
From a technical point of view, the pound may continue to fall after being fixed under the moving average line, which, in our view, is justified and fundamental. The Heiken Ashi indicator colors the bars blue, so there are no signs of a correction at the moment. Today, the report on orders for durable goods in the United States can have an impact on the pound-dollar pair, so it is not recommended to leave it unattended. Also in the afternoon, a less significant report will be published in the States – the level of consumer confidence.
The average volatility of the pound-dollar pair over the past 5 days is 89 points. According to the current volatility level, the working channel as of January 28 is limited to 1.2965 and 1.3143 levels. Judging by the general trend, the pair will tend to the lower border of the channel, a reversal of the Heiken Ashi indicator up may indicate a round of upward correction.
Nearest support levels:
S1 - 1.3031
S2 - 1.3000
S3 - 1.2970
Nearest resistance levels:
R1 - 1.3062
R2 - 1.3092
R3 - 1.3123
Trading recommendations:
The GBP/USD pair is returning to a downward trend. Thus, traders are now advised to sell the pound with targets of 1.3000 and 1.2970 before the start of an upward correction. It will be possible to buy the British currency again after the pair's reverse consolidation above the moving average line with the first goals of 1.3123 and 1.3153.
In addition to the technical picture, you should also take into account the fundamental data and the time of their release.
Explanation of the illustrations:
The upper channel of linear regression - the blue lines of the unidirectional movement.
The lower channel of linear regression - the purple lines of the unidirectional movement.
CCI - the blue line in the indicator regression window.
The moving average (20; smoothed) - the blue line on the price chart.
Murray levels - multi-colored horizontal stripes.
Heiken Ashi - an indicator that colors bars in blue or purple.
Possible variants of the price movement:
Red and green arrows.