4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - sideways.
CCI: -93.7423
The British pound also started falling on Friday, in sync with the European currency. Thus, in principle, we can say that the US dollar has started to become more expensive across the entire spectrum of the market. We have already discussed the reasons in the article on EUR/USD, and in general, more than once recently. The most significant of them is the overall oversold dollar and the technical need to pass 400-500 points against the main trend within the correction. We have also repeatedly said that if we take into account purely economic factors, the situation in the UK is not much better than in the same United States. Yes, the US economy as a result of the "coronavirus" has shrunk by half as much as the British one. However, the British economy will also lose at least 20% in the second quarter. For comparison, even the most affected in the European Union, Italy and Spain lost less than 20%. Thus, if the growth of the European currency in recent days is even more or less justified ("4 American crises" is the reason for this), then this is why the British pound strengthened so much with all the problems with Brexit, negotiations on trade deals with the EU and the US, and the contraction of the British economy in the last 4 years (at first it was just a slowdown), it is unclear. However, market participants thought otherwise and, despite the fact that in the last two weeks professional traders (according to COT reports) absolutely did not like the British pound, nevertheless, this currency continued to grow in price on the foreign exchange market.
In the UK, there were no significant statistics published last week, no new data on negotiations with the European Union on the deal, and no worthwhile information at all. So, by and large, traders are now focused on the second-quarter GDP report we announced, which will be published on Wednesday, August 12. Most likely, this report will create additional pressure on the British currency, which has long since started its march to the south again. Unfortunately, at this time, much will depend not on Britain or the pound, but on the United States and the dollar. The number 1 problem in America remains the same – it is "coronavirus". It cannot be defeated, nor can it be stopped from spreading. Although such a statement would be appropriate if the US authorities were diligently fighting the epidemic, and not just making millions of tests for "coronavirus", which the country's chief epidemiologist Anthony Fauci has already called almost useless in terms of preventing new infections. Fauci also believes that without a good vaccine, the virus will continue to spread, since it is impossible to make sure that all 100% of people on the globe strictly adhere to the rules of social distance and wearing masks. This means that quickly or slowly, the virus will continue to live among people and at any convenient moment will try to provoke new outbreaks in certain countries. Thus, it is America and the US dollar that remain in the "red risk zone". If in the UK so far everything is more or less calm with "coronavirus" (as in Europe), then in America... Donald Trump in such a difficult situation continues to blame China, which, in principle, is quite reasonable, but what is the point now? European leaders probably understand this, but the US President does not. "We created the greatest economy in world history, and then China released this plague. Whether through incompetence or other reasons, they got away. It didn't break into China, but it leaked into the US, into Europe, into just 188 countries. We will not forget this," Trump said in Ohio last week.
In addition, the American President did not forget to once again accuse the Democrats that they are trying to rig the election with all their might, this is their only chance to win, and in general they are funded by China, which "sleeps and sees" that Trump is not the President. I wonder when Trump makes such statements, does he think that China treats him unfairly? The US President also blamed (also once again) house speaker Nancy Pelosi and Senate democratic leader Chuck Schumer. "They only want to get money to save cities and states that they can not manage with dignity and effectively (meaning management under the leadership of Democrats). This has nothing to do with the Chinese virus! They want a trillion dollars. Without interest. We will go the other way!", said Trump. The most interesting thing is that the Democrats are trying to find a compromise with the Republicans and even offer to lower their demands from 3.4 billion dollars to 2.4, if the Republicans in turn increase their offer by one trillion. According to Democrats, this will allow us to get out of the current impasse more quickly with a new package of support for the American economy.
Well, the last thing that should be stated is that according to the latest opinion polls, the ratings of Donald Trump have started to gradually grow, and Joe Biden – to decline. However, so far we are only talking about 2-3%. According to the latest social studies, Biden still continues to lead, just by a slightly smaller margin. At this time, about 49% of Americans are ready to vote for a Democrat and 43% – for a Republican. The most interesting thing is that Joe Biden continues to remain almost in the shadows. No, he is also campaigning, but there is far less discouraging information coming from him than from Trump.
On Monday, no macroeconomic reports are expected from either the UK or the United States. Thus, traders can try to build on Friday's success and continue selling the pound/dollar pair, which would be very logical from our point of view. However, we believe that the position of the US currency is now very shaky. That is, at any moment, especially if a disappointing news stream continues to pour out of America, the bulls can re-activate and start new purchases of the pound and sales of the dollar. The technical picture is identical to the EUR/USD pair. The pair has settled below the moving average, however, it is not yet possible to say that this consolidation will definitely lead to the formation of a downward trend. Although, of course, we believe that most of the factors are still on the side of the US dollar, since all the American negative has already been won back several times by traders.
The average volatility of the GBP/USD pair continues to remain stable and is currently 112 points per day. For the pound/dollar pair, this value is "high". On Monday, August 10, thus, we expect movement within the channel, limited by the levels of 1.2934 and 1.3158. Turning the Heiken Ashi indicator upward will indicate a possible resumption of the upward trend.
Nearest support levels:
S1 – 1.3000
S2 – 1.2939
S3 – 1.2878
Nearest resistance levels:
R1 – 1.3062
R2 – 1.3123
R3 – 1.3184
Trading recommendations:
The GBP/USD pair started a new downward movement on the 4-hour timeframe, overcoming the moving average. Thus, today it is recommended to open short positions with the goals of 1.3000 and 1.2939 and stay in them until the Heiken Ashi indicator turns upward. Buy orders are recommended to be considered no earlier than fixing the price above the moving average with the first targets of 1.3123 and 1.3158.