On Friday, the GBP/USD currency pair started to decline once more. Before this effort, the price made another unsuccessful attempt to move over the moving average line. The pair considerably exceeded the moving average, but it failed to stay above it for an extended period. As a result, the downward trend has now been reinstated in both main pairs. Only if the "double top" pattern for the pound/dollar continues to hold can we anticipate a further decline. The preceding illustration makes it quite evident that the price has not even yet fallen to its most recent local minimum. Consequently, we have a right to anticipate a decline of at least $1.18–$1.19. Given that the market has already taken into account all the "bullish" aspects of the pound, the collapse will probably be more severe. After increasing the key rate ten times, the Bank of England will no longer be allowed to do so indefinitely. We don't hear anything from officials of the British regulator outside of the normal language about the "priority of fighting inflation." As a result, we are unsure of how much the rate can increase. Because the recession in Britain is far worse than in the European Union, it may slow down again at the following meeting.
The pair is still trading below the crucial line in the 24-hour time frame, and the fall targets remain the same: the area of $1.18–$1.19, which is where the Senkou Span B line and the 38.2% Fibonacci level are situated. For traders, this area will be crucial since clearing it will allow for another 300–400 points of decline. In this instance, the upward movement, which is itself a correction of 50% of the negative trend, will cause the pound to correct by approximately 50%. The pair appears to be entering a protracted period of consolidation, during which we can see unpredictable swings of 400–500 points without a clear trend.
Everything begins tomorrow!
This week, there will be a significant number of different fundamental events and macroeconomic publications in the UK. On Tuesday, when data on unemployment and salaries are released, information will start to come in. The official start of a recession may be indicated by rising unemployment, albeit these data are not the most crucial ones. A report on inflation that will be made public on Wednesday could once again fix the problem that the consumer price index is almost not falling. Experts predict that inflation may slow down to 10.2–10.3%, which would represent a decrease of 0.2-0.3% annually. At the current pace, it will take two to three years to reach 2%. And this is assuming the Bank of England keeps up the pressure on the currency. The level of core inflation, which varies in the forecast from decreasing to rising to 7.0%, will also be crucial. If BA hadn't already raised the rate ten times, this could have been excellent news for the pound. The regulator's strong stance will thus not persist just because there hasn't been a decrease in inflation at this time. Retail sales on Friday.
The most important report of the week will be released in the United States tomorrow. By the end of January, core inflation may fall to 5.4-5.5% and overall inflation to 6.2-2.3% y/y. If we consider the base indicator's median value for the past year, as we have already stated, the base indicator essentially does not drop. A decline in the key indicator might indicate that everything is proceeding as expected and that the Fed does not currently need to raise interest rates any further than is necessary. And right now, we're discussing two additional raises of 0.25 percent. The market response to this research may not be strong if the forecast is accurate. On Wednesday, a report on industrial production will be released together with retail sales, which will only have a local impact. Even less noteworthy applications for unemployment benefits were submitted on Thursday. Following the inflation report, there will be numerous statements by Fed officials, which might be important because a strong report might alter their stance on rates. However, the inflation report does not have to be accurate. Nothing was exciting on Friday. The two inflation data and the following talks by Fed officials are expected to be the most significant events of the week, in our opinion.
Over the previous five trading days, the GBP/USD pair has experienced 95 points of volatility on average. This number is the "average" for the dollar/pound exchange rate. Thus, on Monday, February 13, we anticipate channel movement that is limited by levels 1.1960 and 1.2146. A new round of upward correction will begin when the Heiken Ashi indicator reverses and moves back to the top.
Nearest levels of support
S1 – 1.2024
S2 – 1.1963
S3 – 1.1902
Nearest levels of resistance
R1 – 1.2085
R2 – 1.2146
R3 – 1.2207
Trading Suggestions:
In the 4-hour timeframe, the GBP/USD pair continues to trend downward. Therefore, until the Heiken Ashi indicator turns up, it is possible to hold short positions with targets of 1.2024 and 1.1963. In the event of a new price consolidation above the moving average line, long positions may be initiated with targets of 1.2146 and 1.2207.
Explanations for the illustrations:
Determine the present trend with the use of linear regression channels. The trend is now strong if they are both moving in the same direction.
Moving average line (settings 20.0, smoothed): This indicator identifies the current short-term trend and the trading direction.
Murray levels serve as the starting point for adjustments and movements.
Based on current volatility indicators, volatility levels (red lines) represent the expected price channel in which the pair will trade the following day.
A trend reversal in the opposite direction is imminent when the CCI indicator crosses into the overbought (above +250) or oversold (below -250) zones.