4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - sideways.
CCI: -116.7679
On Thursday, January 7, the British pound paired with the US currency also began a new round of downward movement. For the pound, the "high-volatility swing" mode remains, so the pair can easily go down 200-300 points, after which it can sharply resume the upward trend. It should also be noted that the quotes of the British currency are not far from 2.5-year highs. Thus, it is not necessary to say now that the bears have seized the initiative in the market and are preparing for the formation of a new downward trend. The US dollar almost did not react to the events in Washington last night, which once again proves the hypothesis of complete disregard for the fundamental background by traders. Even the topics of Brexit and trade negotiations, which supposedly supported the British currency for a long time, are already behind us, and the pound continues to grow. In the UK, a new strain of "coronavirus" was discovered, and the pound continues to grow. In the UK, the third "lockdown" was announced, and the pound continues to grow. Communication with the UK is closed by many countries around the world to prevent the spread of the new strain, however, the pound continues to grow. The number of cases of "coronavirus" in recent weeks in Britain has increased from "digestible" 20 thousand per day to 60 thousand, but the pound is still growing. The UK economy is preparing for losses of 2-3% at the end of the fourth quarter and 1-2% at the end of the first quarter, even though the US economy will do without losses, and the pound sterling continues to grow. These are now the realities of the foreign exchange market. In such conditions, traders have to trade. In the last month, the pound/dollar pair has been jumping like a flea from side to side, while maintaining an illogical upward trend.
Meanwhile, the issue of access to the European market remains very acute for the UK, especially for its financial sector. This was stated by the head of the Bank of England Andrew Bailey, speaking before the Treasury Committee of the UK Parliament. However, according to Bailey, Britain should not blindly submit to the requirements of the European Union to gain access to financial markets. The British financial sector lost 6 billion euros in turnover on the first day of Brexit, as many stocks left the City of London and moved to the EU. Thus, Bailey indirectly acknowledged the problem of the lack of any agreements between Brussels and London concerning the financial sector and the services sector. This could be a serious problem for Britain. Simply put, all companies that are engaged in various services will now have to independently seek access to European markets. Now European markets are foreign markets for them. Thus, the British economy may be even more affected by the fact that financial companies will lose some of their customers, turnover, and profits.
In general, from a technical point of view, the price is now fixed below the moving average, so you can even consider short positions for a while. We still expect that the upward trend will end, because it can not continue indefinitely without reason. However, this is not an argument that should be taken into account when opening sell orders. It is better to take into account the absolutely specific nature of the movement of the pound/dollar pair in recent times. Perhaps now is not the best time to trade. Perhaps the markets are still in a festive mood and you need to wait a week or two. In general, the main thing is that traders clearly understand what market they are currently entering. Also, the way out of the situation may be to switch to lower timeframes for trading with only strong and clear signals. We present forecasts for lower timeframes almost daily.
The average volatility of the GBP/USD pair is currently 114 points per day. For the pound/dollar pair, this value is "high". On Friday, January 8, thus, we expect movement inside the channel, limited by the levels of 1.3454 and 1.3682. The reversal of the Heiken Ashi indicator to the top signals a new round of upward movement within the "swing".
Nearest support levels:
S1 – 1.3550
S2 – 1.3489
S3 – 1.3428
Nearest resistance levels:
R1 – 1.3611
R2 – 1.3672
R3 – 1.3733
Trading recommendations:
The GBP/USD pair on the 4-hour timeframe is now in a new round of downward movement. Thus, today it is recommended to open new long positions with targets of 1.3672 and 1.3733 if the price is fixed back above the moving average. It is recommended to keep open sell orders with targets of 1.3489 and 1.3454 until the Heiken Ashi indicator turns up. In general, the pair is now continuing to "swing".