4-hour timeframe
Technical details:
Higher linear regression channel: direction - sideways.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - sideways.
CCI: 143.4171
The British pound continues to trade indistinctly, making us recommend traders to be more careful when working with the pound/dollar pair. For most of this week, the pair's quotes stood in one place, and there were no macroeconomic statistics or important news. Only late yesterday evening, the results of the Fed meeting were summed up, which can hardly be called an interesting fundamental background. However, we have long been accustomed to the fact that most of the "foundation" is ignored by the markets. Otherwise, how to explain that the pound continues to remain very high, although the news from the Foggy Albion comes mostly negative? Today we will not talk about the "speculative factor" and the factor of pouring trillions of dollars into the American economy, but rather about the conflict between the EU and the UK. Remember that Brussels accused London of unilaterally changing some provisions of the "Northern Ireland protocol" and threatened to sue? Now this story can be continued.
Let's start with the fact that London and Brussels signed the trade deal at the end of 2020. It entered into force on January 1, 2021, which is called "retroactively." It should be remembered that Michel Barnier and David Frost could agree on anything. After reaching an agreement, you need the British Parliament to approve the deal, and then the European Parliament to do the same. Since there was no time for all this, it was decided that the trade agreement would begin to operate in a "transitional mode," and in a few months, both parliaments would ratify it. First is the implementation, then ratification. Yesterday, it became known that the European Parliament has approved the trade agreement with the UK, and now it must be ratified by all 27 local parliaments. And in the near future, after the full ratification of the trade deal in the European Union, the UK may fall under penalties and duties just because it unilaterally changes or violates specific provisions of the agreement. Some media outlets report that duties may begin to be imposed on imports from Britain to the EU. Recall that in early March, London violated several provisions on Northern Ireland and extended the "transition period" in customs matters unilaterally.
Thus, "the further into the forest – the more firewood." The further the UK goes on the issue of its independence, the more problems it encounters along the way. Scotland and Northern Ireland are already willing to leave the Kingdom, as the "improvement in life" that Boris Johnson promised is not yet happening. Riots continue on the island of Ireland, as Catholics and Protestants can not get along together, and business is now suffering because of the maritime border in the Irish Sea. In general, while it is a smoldering fire, at any moment, it can break out with a new force. And then London will need to sound the alarm. We once again express the strongest surprise that the British pound continues to trade near its 3-year highs. From our point of view, it should have fallen to the level 30 area long ago. However, the US economy continues to pump trillions of dollars, so the dollar supply in the foreign exchange market is growing at a high rate, which so far allows the pound to feel just wonderful with a failed fundamental background from the UK.
In addition, we remind you that now the pound/dollar pair is moving in a "swing" mode. That is, it passes 250-300 points in different directions without a clear path. Moreover, there are also "swings on the lowest timeframes," so the pound sterling is now very difficult and risky to trade. For example, this week, the volatility has sharply decreased, as can be seen from the illustration below, but the quotes still threaten to fall to the area of the 37th level. In general, the pound remains a rather unattractive instrument for trading at this time.
There is, of course, some good news. Boris Johnson said the other day that at least 25% of adults in the country had received two doses of the coronavirus vaccine. "This is a huge achievement made possible by the tireless work of many people in our country," the Prime Minister said.
The average volatility of the GBP/USD pair is currently 82 points per day. For the pound/dollar pair, this value is "average." On Thursday, April 29, we expect movement within the channel, limited by the levels of 1.3857 and 1.4021. A reversal of the Heiken Ashi indicator downwards may signal a new round of downward movement within the "swing."
Nearest support levels:
S1 – 1.3916
S2 – 1.3855
S3 – 1.3794
Nearest resistance levels:
R1 – 1.3977
R2 – 1.4038
R3 – 1.4099
Trading recommendations:
The GBP/USD pair has started a new round of upward movement on the 4-hour timeframe. Thus, today it is recommended to trade for an increase with the targets of 1.3977 and 1.4021 before the Heiken Ashi indicator turns down. Sell orders should be opened if the price is fixed below the moving average with a target of 1.3794 and keep them open until the Heiken Ashi indicator turns up. Also, given the continuing "swing," it is not the worst decision to refrain from trading the pair for a few days.