4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - downward.
Moving average (20; smoothed) - downward.
CCI: -197.7166
On Wednesday, the British pound paired with the US dollar was trading with an increase, in contrast to the euro/dollar pair. Thus, although the two main pairs are trading very similarly now, there is almost no correlation. The pound now continues to move in the "swing" mode, which has already become its hallmark over the past six months. This mode is visible in the illustration below. Each movement up or down is about 100-150 points. The minimum downward trend has been observed in recent weeks. However, at the moment, the pair's quotes have moved away from their local and three-year highs by only 140-160 points. The pair's volatility over the past 30 days is also relatively weak. Only five days out of the last 30 ended with a volatility of more than 100 points. Thus, the pound as a whole does not move too much like the euro/dollar pair. If the euro is now adjusted, then the pound again "pretends." We have already talked about fundamental global factors many times, and nothing changes at this moment. At the same time, the pound/dollar pair reacts to these factors even better than the euro/dollar pair since the pound gives up the positions won after the four-year Brexit period. Therefore, we believe that the pound has a much better chance of resuming the global upward trend. As for ordinary macroeconomic statistics and the ordinary "foundation," their reaction is not always the case. For example, on Tuesday, essential data on British unemployment and wages were ignored by the markets. Regular speeches by the Governor of the Bank of England, Andrew Bailey, do not give traders any new information.
Meanwhile, the coronavirus situation in the UK has started to deteriorate again. So far, we are not talking about a full-scale third "wave." However, in recent weeks, there has been an increase in cases of the disease. Doctors also report that most of the patients were infected with the so-called "Indian" strain, which is more contagious. Against the background of all this sad information, Boris Johnson and the UK government decided to postpone the complete lifting of all quarantine measures for four weeks, which was initially scheduled for June 21. The authorities expect to vaccinate as many Britons as possible in the extra month and expect more than 40 million Britons to receive COVID vaccinations by July 19. However, even on July 19, quarantine restrictions may be extended if diseases cannot be stabilized. "By July 19, we will have vaccinated two-thirds of the adult population, including all those over 50, all the most vulnerable, all frontline health workers and social workers, and all those over 40 who received the first dose by mid-May," Boris Johnson said. However, in the UK itself, such a decision by the government caused a new storm of anger. The British were already tired of the quarantine restrictions and expected that the quarantine would be completely lifted in a week. The media reports that for six days in a row, at least 7,000 cases of the disease are recorded in the country every day.
For the British economy and the British pound, news about a new wave of diseases is negative. At the moment, it is not of a large-scale nature. However, the news about the extension of quarantine measures has put pressure on the pound recently. Now the pace of recovery of the British economy, which was not too high before, is under threat. Recall that in the first quarter, the British economy shrank by 1.5%, and in the second, it is expected to grow by 5.1%. However, if the quarantine is extended beyond July 19, the economy may recover much less. In addition, we should not forget that it was the UK that suffered more than other European countries from the first two "waves" of the epidemic. In the Foggy Albion, the largest number of victims of the "coronavirus" and the largest number of infected people were recorded. Therefore, the option of a third "wave" is not completely excluded. If this negative scenario is realized, then the rapid recovery rate can be completely forgotten. We say this because the Bank of England is unlikely to continue hinting at a possible curtailment of the economic stimulus program and an increase in the key rate in the current conditions. Over the past couple of months, several representatives of the BA dared to say that if the current rate of recovery continues at the beginning of 2022, the rate may already be raised. We believe that these plans are too optimistic in the present circumstances.
Thus, we can conclude that the pound has been under a bit of market pressure recently due to the news about the pandemic. However, even such a potentially significant and dangerous phenomenon could not bring the pound down far. Therefore, in general, the pair continues to experience "swings" with a minimal downward slope. The lower channel of the linear regression has turned down, as the semblance of a correction has been going on for several weeks. However, the senior channel continues to be directed upward. Therefore, the main upward trend persists. In the 24-hour timeframe, there is no correction at all. Only the events of last night allowed the pair to fall significantly. Thus, until the fundamental global factors change, which we have already discussed more than once, we can hardly expect a serious change in the technical picture.
The average volatility of the GBP/USD pair is currently 94 points per day. For the pound/dollar pair, this value is "average." On Thursday, June 17, we expect movement within the channel, limited by the levels of 1.3920 and 1.4107. The upward reversal of the Heiken Ashi indicator signals a new round of upward movement within the framework of the continuing "swing."
Nearest support levels:
S1 – 1.4008
S2 – 1.3977
S3 – 1.3947
Nearest resistance levels:
R1 – 1.4038
R2 – 1.4069
R3 – 1.4099
Trading recommendations:
The GBP/USD pair has started a new round of downward movement on the 4-hour timeframe. Thus, today it is recommended to stay in the sell orders with the targets of 1.3977 and 1.3947 until the Heiken Ashi indicator turns up. Buy orders should be opened in the event of a reversal of the Heiken Ashi indicator to the top with a target of 1.4099.