What to say about the pound ahead of the new trading week? The movement of the "swing" type continues for the pound/dollar pair, although the upward trend, which has lasted for more than a year, also persists. It is impossible to call the current movement of the pair non-standard or unusual. However, it is different from the "normal" movements of any pair. The trend seems to be there, but there are almost no clear corrections. Over the past two months, traders have managed to pull the pair back by "as much as" 560 points from 2.5-year highs, which is very small, given that the entire trend from low to high is about 2,800 points. Yes, this trend began after the strong growth of the US currency, which was observed at the beginning of the pandemic and the beginning of the global crisis in March last year, but this does not negate the trend of 2,800 points. And 560 points is a correction of 20%, which is certainly very small. Thus, on the one hand, if the downward movement resumes now, then there can be no surprise about this, and on the other – why then has the pair not yet adjusted to a higher value? After all, there were many fundamental reasons, and now there are enough. However, from our point of view, the "speculative factor" and the factor of pouring trillions of dollars into the American economy, which banally increases the supply of dollars on the foreign exchange market, naturally reducing its rate, continue to work in full force. Thus, all factors like the "Scottish question" or the "Northern Ireland protocol" and the unrest caused by it do not play a special role for market participants. Not to mention the macroeconomic statistics, which were plentiful in the UK last week. However, most of them were ignored, and the smaller part had only a minimal impact on the movement of the pound/dollar pair. It turns out that you can only pay attention to global factors, but they do not guarantee an adequate response to them.
However, we certainly do not recommend that you completely abandon the study of macroeconomic statistics. First, it provides a clear picture of the pace of recovery in the British and American economies. Secondly, in the context of one day, there may still be a reaction. A fairly important report on changes in the volume of orders for long-term goods will be published in the United States on Monday. This report is important because this category of goods is characterized by a high cost and accordingly reflects the economic activity of the country's population. The indicator is expected to grow by 1.7% - 2.5% in March. However, all the recent reports on this indicator did not cause a market reaction. On Tuesday and Wednesday, no statistics will be published either in the United States or in Britain. Still, on Wednesday evening, there will be a summary of the Fed meeting and a press conference with Jerome Powell. Recall that the rhetoric of Powell is now radically different from the rhetoric of Christine Lagarde. If the head of the ECB speaks openly about the weakness of the recovery and the continuing high risks of a pandemic, the Fed chairman, on the contrary, notes the increased pace of recovery. Thus, we can expect from Powell on Wednesday, if not "hawkish" statements, then at least positive statements, which may provide short-term support for the US currency.
On Thursday, the US will publish a really important report on GDP for the first quarter of 2021. It is not the final value. However, experts expect an increase of 6.3% - 6.5% in quarterly terms. Thus, after a fairly strong fourth quarter (+4.3% q/q), an even stronger first quarter may follow. Naturally, again, the US dollar may rise against both the euro and the pound in the short term. On Thursday, a secondary report on applications for unemployment benefits will be released in these conditions. On Friday, there will also be only minor reports – the levels of income and spending of the American population and the index of personal consumption expenditures. As you can see, this week, there will be no statistics from the Foggy Albion, so all attention is on the States.
In general, we continue to insist that markets will continue to focus not on "macroeconomics", but on global fundamentals. And even then, with some stretch marks. If we expect further growth for the euro currency, then the current market mood can be described as "uncertain" for the pound. Thus, both the correction can resume and the upward trend. Most likely, only the "swing" mode of movement will not change. The Bollinger band indicator and the Ichimoku indicator now eloquently show that the pair is close to flat. Thus, it is best to trade the pair, using the most short-term timeframes, where trends have time to form.
Trading recommendations for the GBP/USD pair:
The pound/dollar pair on the 4-hour timeframe is trying to start a new downward trend. However, it is quite difficult to call a movement of 250-300 points a "trend". At the moment, the pair's quotes are fixed below the critical line, so the downward movement should continue next week. However, such movements completely fit into the "swing" mode, when the pair alternates periods of growth and fall of 250-300 points. Therefore, we expect to descend to the area of level 37 within the next five working days.
Explanation of illustrations:
Price levels of support and resistance (resistance/support) – target levels when opening purchases or sales. You can place Take Profit levels near them.
Ichimoku indicators, Bollinger Bands, MACD.