The GBP/USD currency pair also grew on Monday and grew by more than 100 points during the day. Recall that no macroeconomic statistics were planned for Monday, and the growth of the British currency began at night. True, the speech of the Chairman of the Bank of England Andrew Bailey took place yesterday, but Mr. Bailey rarely pleases the market with important information. Thus, this event can be written off, especially since the BA head, as usual, did not report anything important. Moreover, the European currency also showed growth throughout the day, so the matter is most likely, as we expected, in the technical factor. Recall that the euro and the pound have been falling synchronously for a long time, and now they have begun to grow synchronously. Last week, both the EU and the UK had reports that could formally cause the growth of both European currencies. However, we do not believe that those reports were able to cause a fairly strong growth of the euro and the pound. We are inclined to believe that traders have finally remembered that they need to adjust from time to time. That is why we are now seeing a movement to the north.
Thus, the technical picture for the pound is now almost identical to the technical picture for the euro. The pound/dollar is located above the moving average, but both linear regression channels are directed downward. The growth potential of the British currency is high, but everything will depend on the traders themselves since now we can say for sure that the market has already played most of the factors, so it is not a fact that geopolitics and the "foundation" will continue to have a destructive impact on the pound sterling.
Washington calls on London to respect the "Northern Ireland Protocol".
Last week, we already said that the UK has again raised the issue of revising the "Northern Ireland Protocol", the essence of which, according to British politicians, destabilizes the situation in Northern Ireland. London demands from Brussels a complete revision of this protocol, but Brussels refuses. Now it has become known that Washington has joined the solution of the issue, which is one of the guarantors of the Belfast Agreement of 1998, which put an end to the long conflict in the region. British Foreign Minister Liz Truss said she had talked to the Americans on this topic and made it clear that the "protocol" in its current form could not continue to exist and created problems in the region. In turn, the speaker of the US Congress Nancy Pelosi said that Britain's refusal of the "protocol" could create serious problems in reaching a free trade agreement between the Kingdom and the States. In principle, Washington voiced the same position last year. Then Joe Biden personally commented on the situation and said the same thing that Pelosi is now. Plus, it should be remembered that Biden has Irish roots, so stability and tranquility on the island of Ireland are especially important for him.
As before, the stumbling block lies in the border between Ireland and Northern Ireland and customs control on it. Since Britain has left the EU, the border and customs control must be present between "European" Ireland and "British" Northern Ireland. However, Unionists believe that any customs checks, wherever they are carried out, undermine the country's status as part of the UK. In general, to be honest, it is completely unclear how to solve this issue. The plan to move the customs inspection points to the ports failed. It seems that another "deadlock" is brewing on the global geopolitical map. How to get out of it is unclear. However, as we have already said, London and Brussels remembered the "protocol" very timely. There are already a lot of problems in the world, now another one will be added to this list, which will only add tension to relations between the European Union and the UK. So far, this topic is unlikely to have an impact on the pound or the euro. Both currencies have been falling for a long time and are now busy recovering. But in the future, these are new economic problems for both sides and, perhaps, even a trade war.
The average volatility of the GBP/USD pair over the last 5 trading days is 147 points. For the pound/dollar pair, this value is "high". On Tuesday, May 24, thus, we expect movement inside the channel, limited by the levels of 1.2417 and 1.2712. The reversal of the Heiken Ashi indicator downwards signals a round of corrective movement.
Nearest support levels:
S1 – 1.2512
S2 – 1.2451
S3 – 1.2390
Nearest resistance levels:
R1 – 1.2573
R2 – 1.2634
R3 – 1.2695
Trading recommendations:
The GBP/USD pair continues to form a new upward trend in the 4-hour timeframe. Thus, at this time, you should stay in buy orders with targets of 1.2643 and 1.2712 until the Heiken Ashi indicator turns down. It will be possible to consider short positions if the price is fixed below the moving average line with targets of 1.2329 and 1.2268.
Explanations of 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.