4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - upward.
CCI: 61.3915
On Thursday, May 20, the British pound also failed to overcome the moving average line and maintained an upward trend. Looking at the illustration above, it may seem that the pound/dollar pair has declined over the past couple of days much stronger than the euro/dollar pair. But no. The overall drop after the publication of the Fed minutes was the same 50 points. The pair passed another 50 points down the day before. Thus, the British currency adjusted by 100 points. For the pound, this is not even a correction within the trend, which at the moment is 540 points in size. It is the trend for the last month and a half. The overall upward trend, which began in March last year, is 2,800 points, and the maximum correction against it is 550 points. Thus, the pound continues to trade very high, and its technical picture has not changed in any way over the past two days. All the same, the factor of pouring trillions of dollars into the American economy works against the dollar. All the same, the "speculative factor" works for the pound. All the same, all the fundamental background from the UK is ignored. Thus, nothing changes for the pound/dollar pair. Therefore, we continue to wait for further movement to the north. Of course, you can never be 100% sure of anything. No one knows what will happen tomorrow or in a week. Perhaps the "speculative factor" will stop working. Perhaps market participants will finally look at the state of the British economy, compare it with the state of the American economy, and rush to get rid of the British pound. Perhaps the Fed will stop pouring hundreds of billions of dollars into its economy. Perhaps two new stimulus packages from Joe Biden will still get stuck in Congress, as even Democrats will oppose them. Anything can happen. But so far, there are no prerequisites to expect any global changes.
By the way, I want to immediately note that the panic and paranoia in Britain about inflation is much lower. We can say that no one is particularly interested in British inflation at all. Even the British themselves. No one is hysterical about the fact that the consumer price index can grow further. The Bank of England declares that it will not allow inflation to stay above the target level for a long time, and in general, it does not expect this indicator above 2.5%. Andrew Bailey clearly says that a spike in inflation is possible due to energy prices, which have risen recently. Therefore, much less attention is now paid to British inflation. However, in general, the fundamental background in the Foggy Albion remains "below the plinth." The only positive news is that 70% of adults in the UK have already received at least one dose of the vaccine, and 40% are fully vaccinated. "Seven out of every ten adults in the UK have received the first dose of the vaccine," Boris Johnson wrote on Twitter. It is excellent news. However, we recall that in the United States, the rate of vaccination of the population is not lower. However, in the UK, many still blame Boris Johnson and his team for the failure in the first stages of the fight against the "coronavirus." Therefore, the prime minister now relies on the results of vaccination. Therefore, everyone in the UK is talking about vaccination a lot. Boris Johnson also said in Parliament that the existing vaccines show high effectiveness in countering the "Indian" strain of COVID, so there is nothing to worry about.
At the same time, Boris Johnson received a new round of criticism from the Scottish and Welsh governments. The UK will conclude a trade deal with Australia, under the terms of which Australian farm products will be delivered to Britain duty-free. Johnson said that British farmers should not be afraid of free trade. In his opinion, such international agreements will allow British farmers to do great things. However, Scottish and Welsh farmers and governments themselves are not happy with the deal. In Scotland and Wales, they believe that duty-free trade with Australia will ruin their farmers, and rural businesses will be destroyed. The leadership of the Welsh party Plaid Cymru called on London to reject the deal. The same opinion is held in the Scottish National Party, which is the main rebel of recent years in the UK. Recall that the SNP leader Nicola Sturgeon is actively promoting the idea of holding a new referendum for Scottish independence and, therefore, gets a new trump card in his hands. Now she can openly declare that London's international politics are having a disastrous effect on the Scottish economy and its people. By the way, the agreement has not yet been concluded. However, the probability of its approval is very high.
By the way, according to the latest statistics, inflation in the UK has jumped twice and is now 1.5% y/y. It is still below the target level of 2.0%. So it doesn't make any sense to panic about it. It makes sense to panic because of the slow economic recovery. Recall that in the fourth quarter, the GDP grew by only 1.3%, and in the first quarter – decreased by 1.5%. The economy is reviving because quarantine restrictions are being lifted, and almost half of the British population has already been vaccinated. The British economy is expected to grow by 5.1% in the second quarter. But here's the problem: in America, the economy is expected to grow by 12.9% in the same period.
The average volatility of the GBP/USD pair is currently 75 points per day. For the pound/dollar pair, this value is "average." On Friday, May 21, thus, we expect movement within the channel, limited by the levels of 1.4109 and 1.4259. A reversal of the Heiken Ashi indicator downwards may signal a new round of corrective movement.
Nearest support levels:
S1 – 1.4160
S2 – 1.4130
S3 – 1.4099
Nearest resistance levels:
R1 – 1.4191
R2 – 1.4221
Trading recommendations:
The GBP/USD pair resumed its upward trend on the 4-hour timeframe. Thus, today it is recommended to support open buy orders with targets of 1.4221 and 1.4259 until the Heiken Ashi indicator turns down. Sell orders should be opened if the pair's quotes are fixed below the moving average with targets of 1.4069 and 1.4038.