The GBP/USD currency pair continued to grow on Thursday as if nothing had happened. We have been expecting for several days that the growth of the British currency will stop, as there have already been several technical sell signals for this. But every time the upward movement is restored. There is no need to talk about the reasons for the growth of the British pound now. We believe that the factor of raising the key rate by the Bank of England should have already been worked out by the market a dozen times. And there are no other factors, especially from the UK, now. It is necessary to deal very clearly with the current fundamental background. If we take into account the factors that allowed the dollar to grow in 2021, then they have also already been worked out by the markets and, therefore, now it is the pound that should become more expensive. But this is for the medium term, for a period of six months to a year. If we take a short-term perspective, then the pound has grown by 550 points in a few weeks and is unlikely to be based on only one factor of a rate hike in Britain. We want to say that it is high time for the pair to adjust downwards, after which the pound growth can be resumed. However, from a technical point of view on a 4-hour timeframe, the picture turns out to be almost perfect. The fact is that all these few weeks the pair is ideally located above the moving average and does not even try to gain a foothold below it. Traders can just stay in the longs all this time. Even the Heiken Ashi indicator turns down extremely rarely and reluctantly. There are no corrections at this time. Based on all of the above, we support the growth of the British currency this year, but not so fast.
Boris Johnson once again spat on the rules and ethics.
In the UK, in the last few days, even the topic of "coronavirus" has faded into the background, although the country continues to update its anti-records for the number of diseases per day. However, what is happening in the UK Parliament now cannot be called anything but a farce or a scandal. It should be understood that this is not just about the government, but about the government of one of the countries that consider itself a significant figure on the international chessboard. Nevertheless, its Prime Minister Boris Johnson for 2.5 years got into so many stories and scandals that now there is talk that he will leave his post ahead of schedule, having lost the trust of not only voters but also his party members. We have already said that the support and popularity of a particular figure are important in politics. It was clear to everyone that Donald Trump was good as a businessman but bad as a politician. However, he was popular because of his oratory and business acumen. American voters at a certain point thought that a president who likes to say what he thinks and is a good businessman could become a good president. We all know what came of it. Trump became one of the few US presidents who were not re-elected for a second term and was left with a scandal after the attack of his "fans" on the Capitol. It seems that Boris Johnson is following in the same footsteps, whose only merit to the Motherland remains the completion of Brexit, which promised to become "Santa Barbara" for Britain. However, the British currency amid the brewing political crisis continues to show enviable growth, ignoring the American fundamental background (the same speeches by Jerome Powell and several FOMC members), American statistics (inflation report), and the British fundamental background. The pound is now growing either on pure "technology", or it is not clear why at all. Of course, we can always trade simply on technical signals, and this is very good when only one factor affects the pair, and not 10 at once. However, it is still necessary to build fundamental hypotheses. However, how can they be built now if what is happening in the UK and the States does not bother market participants at all?
The average volatility of the GBP/USD pair is currently 72 points per day. For the pound/dollar pair, this value is "average". On Friday, January 14, thus, we expect movement inside the channel, limited by the levels of 1.3646 and 1.3788. The reversal of the Heiken Ashi indicator downwards signals a possible round of downward correction.
Nearest support levels:
S1 – 1.3672
S2 – 1.3611
S3 – 1.3550
Nearest resistance levels:
R1 – 1.3733
R2 – 1.3794
Trading recommendations:
The GBP/USD pair continues a strong upward movement on the 4-hour timeframe. Thus, at this time it is recommended to stay in the longs with a target of 1.3794 since the price is still located above the moving average line. It is recommended to consider short positions if the pair is fixed below the moving average with targets of 1.3550 and 1.3489, and keep them open until the Heiken Ashi indicator turns upwards.
Explanations to the illustrations:
Linear regression channels - help determine the current trend. If both are directed in the same direction, then the trend is strong now.
Moving average line (settings 20.0, smoothed) - determines the short-term trend and the direction in which trading should be conducted now.
Murray levels - target levels for movements and corrections.
Volatility levels (red lines) - the likely price channel in which the pair will spend the next day, based on current volatility indicators.
CCI indicator - its entry into the oversold area (below -250) or into the overbought area (above +250) means that a trend reversal in the opposite direction is approaching.