4-hour timeframe
Technical details:
Higher linear regression channel: direction - sideways.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - sideways.
CCI: -59.0586
The British pound has been declining for most of the past week, in contrast to the European currency. It again proves that there is no correlation between the two major currency pairs at the moment. It means that the factors that influence the movement of both pairs are now different. We have already talked about the fact that the pound has a "speculative factor" that continues to help this currency to hold very high. However, there is also a "swing" mode, which does not allow the pair to show a clear trend. The pair continues to alternate segments of 200-300 points up and down. However, it is doing this now without a specific direction of movement. Thus, first of all, we expect such a movement from the pair in the new week. Therefore, the pair may fall to the area of the 37th level. It is about the technical picture.
Now let's talk about the "foundation." The latest macroeconomic data show that economic activity in the UK is growing at the highest rate, and retail sales increased at the end of March by a record value for the last nine months. However, this fact should not mislead traders because, in the United States, the economy is also growing at the highest rate. Only the dollar paired with the euro has been falling for almost a month. And given that the positive statistics from the Foggy Albion came just last week when the pound mostly fell, we can conclude that the statistics are not a reason to buy the British currency. The Bank of England expects the economy to recover at a record pace in 2021. However, it should not be forgotten that in 2020 this economy was falling at a record pace. But the UK's public debt also increased at the end of the 2020 financial year, which ended in March. According to official data, the debt had increased by a record value since 1947, when such statistics began to be conducted at all. For the whole of 2020, the public sector borrowed 303 billion pounds, although this amount was only 57 billion a year earlier. In general, the statistics are contradictory and already definitely do not provide any support to the pound.
The markets are now ignoring more important factors. Today - April 26, and already on May 6, elections to the local Parliament will be held in Scotland, which, according to experts, will be won by the party of Nicola Sturgeon, who is the current First Minister of the country. Simultaneously, the victory will be resounding, and it will allow the Scottish National Party to form a majority government. Nicola Sturgeon promised not just from the pulpit but through the official election program that Scotland will get the right to hold a new independence referendum and leave the United Kingdom by the end of 2023 at the most. Thus, this threatens big problems for London, which has so far refused to grant official permission to hold a referendum, but Edinburgh, after all, most likely has trumps up its sleeve. Nicola Sturgeon cannot help but understand that such loud promises are not thrown around to the right and left. Accordingly, it has a clear plan. But opinion polls show that the majority of Scots in the referendum will vote to leave the UK. Their preponderance will be small, but after all, in the 2016 referendum, the preponderance was minimal. Thus, so far, everything is moving towards the fact that the UK will lose its territories over the next few years, and at the same time, a "piece" of the economy.
Well, there is nothing to say about Northern Ireland. It has been the main "stumbling block" for the past four years. However, not once in the country itself was there any mood to secede from Britain. But now they do. According to the latest opinion polls conducted among the Irish and Northern Irishmen, the majority is inclined to believe that within the next 25 years, Northern Ireland will also leave the UK. And here lies a very interesting idea. If Boris Johnson says the UK will be much better off outside the EU, why aren't the Irish and Scots happy about it? If life in the whole of the UK is going to get better (which is still very controversial), why are two countries out of a possible three and only four intending to leave the Kingdom? All these reflections suggest that the future of Great Britain is rather hazy, like the weather in the Kingdom itself. With that, the fog is now really impenetrable.
This week, traders' attention should be drawn to the publication of GDP in America for the first quarter, as well as the Fed meeting, its results, and a press conference with Jerome Powell. No major events are planned in the UK. However, most likely, the pound/dollar pair will continue to move according to its laws and rules.
The average volatility of the GBP/USD pair is currently 104 points per day. For the pound/dollar pair, this value is "high." On Monday, April 26, we expect movement within the channel, limited by the levels of 1.3770 and 1.3978. A reversal of the Heiken Ashi indicator to the top can signal a round of upward movement within the "swing."
Nearest support levels:
S1 – 1.3855
S2 – 1.3794
S3 – 1.3733
Nearest resistance levels:
R1 – 1.3916
R2 – 1.3977
R3 – 1.4038
Trading recommendations:
The GBP/USD pair started a round of downward movement on the 4-hour timeframe. Thus, today it is recommended to stay in short positions with targets of 1.3794 and 1.3770 until the Heiken Ashi indicator turns up. Buy orders should be opened to overcome the moving average with the targets of 1.3916 and 1.3977 and keep them open until the Heiken Ashi indicator turns down.