4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - downward.
Moving average (20; smoothed) - downward.
CCI: -63.5072
On Thursday, the British pound continued to fall against the US currency, however, it began an upward correction by the end of the trading day. Thus, at the end of this week, the pound may try to grow slightly. However, to say this about the currency, which has grown by almost 27 cents over the past year, is quite strange. As with the euro, the current downward movement is interpreted as a normal technical correction. It looks like a downward trend on a 4-hour timeframe. And on the 24-hour chart, this is a correction. Thus, we continue to believe that at any moment the upward movement can resume. However, this assumption applies to the pound sterling to a lesser extent than to the euro currency. Recall that if the euro currency has been trading more or less explicable over the past year, the pound sterling has become more expensive in the last 6 months on factors that were opposed by a whole list of equally significant reasons for the fall of the British currency, which were simply ignored by market participants. The pound is falling and the US dollar is growing. Who can clearly explain why? In the UK, nothing has changed. If we are to track the changes, we can draw the opposite conclusion. In recent months, the UK has been undergoing a rapid vaccination process, so at this time it would be more logical to see a strengthening of the pound. However, the British currency is the opposite. While there were no clear and understandable reasons for growth, the currency grew based on the "speculative" factor and due to a strong increase in the volume of the money supply in the United States. Now, when the macroeconomic situation has not changed much either in the United States or in the United Kingdom, the pound has started to fall. Some might say that the American economy has started to recover at a faster pace than the British one. It was clear in the fall of 2020. In the Foggy Albion this winter, two "lockdowns" were introduced at once, the last of which is being weakened now. Thus, it was obvious back in the autumn that the winter quarters for British GDP will pass with a "minus" sign. Based on all of the above, we can conclude that most of the reasons for the current fall of the pound/dollar pair are technical.
At the same time, it is not just the governments of many countries around the world that are pouring hundreds of billions into their economies to save them from collapse and stimulate recovery. The International Monetary Fund is going to create a new reserve fund for $ 650 billion to provide financial assistance to developing countries. According to a source as close as possible to the IMF board of directors, a decision on this fund will be made as early as next month. "I intend to submit to the Board of Governors a formal proposal for a new allocation of $ 650 billion," said IMF Chair Kristalina Georgieva.
However, British Prime Minister Boris Johnson got into quite a bad story. The Prime Minister said in a closed-door video conference of the Conservative Party that the success of the vaccination program was the result of capitalism and greed. However, within a few seconds of what he said, Johnson asked his colleagues to forget these words. However, they were still leaked to the press. Sources close to the Prime Minister immediately said that Johnson's words were just a joke. However, many did not like Johnson's words, and he came under a barrage of criticism.
What awaits the British pound in the coming weeks. If you look at the longer-term timeframes, it becomes clear that at the moment the pound/dollar pair has corrected by only 38.2% against the last round of the upward movement, which lasted for 5 months. Thus, a rebound from the 38.2% Fibonacci level may just be a signal for a new upward trend on the 4-hour timeframe. This level lies at 1.3640. As for the fundamental background, the governor of the Bank of England, who also spoke several times this week, as well as his colleagues, did not tell the markets anything interesting. Thus, during this week, traders did not have much to react to. And those macroeconomic reports that deserved attention were once again ignored. A striking example of this is the report on GDP in the United States for the fourth quarter, which was published yesterday in the third assessment. The actual value was +4.3%, although the previous one was 4.1%, and the forecast did not differ from this figure. However, GDP continues to grow at a high rate, so the US dollar has had excellent results. However, the pound/dollar pair, on the contrary, began to grow during the publication of this report. Even though there was just a downward movement before the publication of this report. In general, "macroeconomics" was once again ignored by traders. This means that "technology" remains in the first place.
The average volatility of the GBP/USD pair is currently 91 points per day. For the pound/dollar pair, this value is "average". On Friday, March 26, therefore, we expect movement within the channel, limited by the levels of 1.3649 and 1.3831. The reversal of the Heiken Ashi indicator back down can signal the end of the upward movement.
Nearest support levels:
S1 – 1.3672
S2 – 1.3611
S3 – 1.3550
Nearest resistance levels:
R1 – 1.3733
R2 – 1.3794
R3 – 1.3855
Trading recommendations:
The GBP/USD pair has started an upward correction on the 4-hour timeframe. Thus, today it is recommended to open new sell orders with targets of 1.3672 and 1.3649 after the Heiken Ashi indicator turns down or in the case of a rebound from the moving average. It is recommended to consider buy orders with targets of 1.3831 and 1.3855 if the price is fixed above the moving average.