4-hour timeframe
Technical details:
Higher linear regression channel: direction - downward.
Lower linear regression channel: direction - downward.
Moving average (20; smoothed) - sideways.
CCI: 3.8355
The British pound continued to trade as it should on Tuesday. Although after the publication of the US inflation report, the pair's quotes fell by almost 100 points. It is exactly what we talked about in the article on the euro/dollar. And it does not apply to the pound/dollar pair. The fact is that the British currency continues to trade completely differently from the single European currency. At the same time, such a sin began to be found for quite a long time and has been observed for almost a year. Then the pair goes into a flat near its 3-year highs, then the pair arranges a "swing" without a certain direction. In general, all these movements in recent months and even a year are extremely difficult to work out. Hardly anyone needs to be reminded of what has happened in the world over the past 12 months. At the moment, the UK and US economies are just beginning to recover from the crisis. The American one does this very quickly. However, as we have already understood in the article on the euro/dollar, it is more artificial. The British economy is recovering slowly, as evidenced by the latest GDP report for May, which turned out to be twice lower than forecasts. As a result, the overall technical picture for the pair looks like this. From a technical point of view, the drop in quotes may continue to the area of 1.3600-1.3666, and it is best to work out all movements on the pair on an hourly timeframe or lower. The pound/dollar pair is currently experiencing sharp reversals. Thus, it is very difficult to react to them on the older timeframes. At the same time, from a fundamental point of view, the pair can resume an upward trend at any time, as the American economy continues to be filled with trillions of dollars from the Fed and the government. Thus, we expect the upward trend to resume either from the current positions or after falling to the area of 1.3600-1.3666.
By the way, the only important event of yesterday was the publication of American inflation. We usually do not consider local statistics in fundamental reviews. However, we will make an exception this time. The fact is that the report itself turned out to be too resonant. It turned out that inflation not only did not begin to slow down, as promised by Jerome Powell, Christine Lagarde, and Andrew Bailey (recall that all three of them unanimously declared that the growth of inflation is a temporary phenomenon), it continued to accelerate in the United States and amounted to 5.4% in annual terms in June. Thus, American inflation threatens to get out of control of the Fed, which is not good. One thing is clear. In the near future, either Jerome Powell or someone from the Federal Reserve, or the US government should explain such a high level of consumer prices. Jerome Powell hinted at the last meeting of the Fed that the regulator is going to start discussing the curtailment of the quantitative stimulus program in the near future. Therefore, the stronger and faster inflation increases, the faster this time will come. It is also worth noting that the reaction of the markets to the increase in inflation in June was the purchase of the US dollar, which at first glance looks quite strange. Recall that in general, the growth of inflation is a negative phenomenon for the economy, since it means the depreciation of money. Thus, this is also a negative phenomenon for the national currency. It is clear that, from the Fed's point of view, inflation of 2% is useful for the economy. The central bank may think that moderate inflation is good, but in fact, inflation is bad. However, the US dollar has risen in price and there can be only one explanation for this. Traders believe that the more the consumer price index accelerates, the faster the Fed will begin to cancel all stimulus programs. However, we believe that Powell and the company can greatly disappoint the markets and allow inflation to grow further. The problem is that achieving 2% inflation by pouring $ 10 trillion into the economy is not the most difficult task. But it is very difficult to reach the pre-crisis levels of the state of the labor market and it is impossible to do it with cash injections alone. It takes quite a lot of time. Over the past year, Americans have become accustomed to sitting on unemployment benefits. Of course, we can hardly say that this is a pleasant pastime, but not everyone can find a job with the same salary as before the crisis. In any case, this process is not fast. It turns out that without additional stimulus, the labor market will slow down its recovery, so the Fed does not benefit from such a step. But without this step, inflation will continue to accelerate further. In general, after such an unexpected report, we need to wait for the comments of Jerome Powell, who will make a speech today.
In the last few days, the pound/dollar pair continues to jump like a flea, but not all of its jumps were provoked by any important events or macroeconomic publications. Thus, the nature of the pair's movement should be taken into account when opening any positions.
The average volatility of the GBP/USD pair is currently 95 points per day. For the pound/dollar pair, this value is "average". On Wednesday, July 14, we expect movement inside the channel, limited by the levels of 1.3729 and 1.3919. A reversal of the Heiken Ashi indicator upwards will signal a new round of upward movement.
Nearest support levels:
S1 – 1.3824
S2 – 1.3794
S3 – 1.3763
Nearest resistance levels:
R1 – 1.3855
R2 – 1.3885
R3 – 1.3916
Trading recommendations:
The GBP/USD pair started moving down sharply in the 4-hour timeframe, but in general, the entire movement of the pair again resembles a "swing". Thus, today, it is recommended to stay in sell orders with targets of 1.3794 and 1.3763 until the Heiken Ashi indicator turns up. Buy orders should be opened if the price is fixed above the moving average line, with targets of 1.3885 and 1.3916, and keep them open until the Heiken Ashi turns down.