In today's article on the GBP/USD currency pair, we will touch upon the still topical issue of COVID-19, and pay special attention to the technical picture, which, taking into account the results of the past week, has developed for this trading instrument. I would like to remind you that the main event of the past five days was the US labor market reports. More details on this information can be found in today's euro/dollar review, so I see no reason to repeat myself in this article. In my opinion, it is better to pay attention to other important events, to which, without any doubt, the news from the United States of America can be attributed. So, as it became known this weekend, the nearly two trillion dollar draft rescue plan for the US economy, initiated by the newly elected President Joe Biden, has been approved by the Senate. Now the White House administration and Biden personally hope that the House of Representatives will approve this bill as quickly as possible, after which Biden will only have to sign the document.
However, we must admit that the battles over the adoption of this large-scale bill were serious and lasted more than 24 hours. Republicans insisted on making about 30 amendments to the document, but in the end, Biden's plan (or his team) was supported by 50 senators, while 49 voted against. The huge funds provided for the plan to save the United States from the COVID-19 pandemic will be distributed as follows: About 400 billion dollars will be directed specifically to the fight against coronavirus infection; $1 trillion will be used to help the people of the United States; the rest will be spent on economic stimulation, that is, to support the world's leading economy, on the state of which the economic situation around the world actually depends. This is very important and definitely positive news that will further strengthen the position of the US dollar. At least, it would be quite logical. However, against this background, risk appetite may also increase, but the technical picture for many major currency pairs indicates that the US dollar will strengthen its positions shortly.
Weekly
So, the pound turns around. At least, looking at the weekly chart of the pound/dollar currency pair, and directly at the penultimate circled candlestick, you can come to this conclusion. Let me remind you once again that this is nothing more than a reversal model of candlestick analysis called "Shooting Star". This candlestick is characterized by a fairly long upper shadow and a very small lower one, or even the absence of one. Another very important technical point is the appearance of this candle at the very end of the bullish trend, as well as a failed attempt to break through the middle line (dashed) of the ascending channel. And indeed, after the appearance of this model, the pair ended trading on March 1-5 with a decline, that is, the signal processing, in fact, has already begun.
Thus, we have a fairly clear signal of a trend change for the GBP/USD currency pair. But whether it will have its continuation will show the course of the weekly trading that has begun. At the same time, to break this signal, the pound bulls need to absorb the last bearish candlestick and the Shooting Star pattern with growth, that is, close the current week above the upper shadow of this candle and the 1.4231 mark. In my opinion, it will be extremely difficult for the bulls to do this, especially since the US dollar is showing signs of a reversal and strengthening against all its main competitors. In general, the signal is quite strong, and if it is worked out, we should expect a decline in the pound/dollar pair to the broken resistance of 1.3756, which has already actually occurred, and then to the important technical mark of 1.3700, after which it suggests a breakdown of the lower border of the ascending channel, which is still a bullish trend line.
Daily
The technical picture on the daily chart confirms the idea that the pound bulls have run out of power. This is particularly indicated by the inability of the bulls to return the quotes above the most important psychological and technical level of 1.4000. Considering that now the Tenkan line (red line) of the Ichimoku indicator has also dropped to this level, it will be even more difficult to go up the 1.4000 mark. However, such attempts cannot be ruled out, but, as it seems from the technical picture, on the two charts reviewed today, most likely, we will see another unsuccessful attempt to go up the 40th figure. The breakdown of the Kijun line (blue line) of the Ichimoku indicator and the breakdown of the support level 1.3857 indicates a bearish mood. Returning to the value of the middle lines of price channels, it is impossible not to note a rebound from the average line of the daily ascending channel. These are possibly temporary difficulties faced by the pound bears. If the quotes still fall below the middle line of the channel and consolidate below it, we can count on a subsequent decline to the upper border of the Ichimoku indicator cloud, which is now near 1.3638.
Trading recommendations for GBP/USD
Based on the above, the main trading idea for the pound/dollar pair is selling, which is best to open after short-term corrective pullbacks to the levels of 1.3925/1.3975. I recommend considering earlier and aggressive sales on the pair's attempts to return above the strong technical level of 1.3900. Taking into account the charts reviewed, purchases seem to be a more risky positioning, so it's better to wait with them for now. In tomorrow's GBP/USD article, we will look at shorter time frames and, if necessary, make changes to today's forecast and/or add trading recommendations.
Successful bidding!