The GBP/USD currency pair showed confident growth on Friday, ignoring all the positive information for the dollar and focusing only on the negative. If the euro currency movements are at least more or less logical (especially in the long term), then the pound continues to grow, from time to time formally correcting. On Friday, we saw new growth, which led to the update of the last local maximum, so everything is still going toward the renewal of the upward trend.
In recent months, we have repeatedly talked about the baselessness of the growth of the British currency but also noted that the trend is inertial, so it can continue indefinitely. The market has only one possible reason for which it continues to open long positions – the potentially high peak value of the Bank of England's rate. There can be no other reasons. However, even the Bank of England, whose rate is already equal to 5%, cannot raise it forever. On the 24-hour TF, the technical picture looks like the completion of an upward trend. The pound is overbought and has not been able to correct properly for a long time. Therefore, one should be prepared for the beginning of a protracted fall.
The market does not always need specific reasons to move the pair in one direction or another. Quite a few large players on the market can buy a certain currency for their own purposes and activities. This needs to add more understanding to the question of who suddenly needed so much British currency. The market does not always move in a logical direction.
Important events will take place in both the US and the UKNext week in the UK there will be quite interesting events. As early as Monday, there will be a speech by the Chairman of the Bank of England, Andrew Bailey. Right now, any of his speeches can have a huge impact. Although Mr. Bailey does not often make loud statements, he can speak about monetary policy at any moment. And such information from his mouth will have double weight for traders. On Tuesday in the UK, reports on unemployment, average earnings, and unemployment benefit claims will be published. Let's remind that the Bank of England considers one of the reasons for high inflation to be high wage growth rates. The unemployment rate and benefits claim to have a high weight in the eyes of traders.
On Thursday in the UK, the GDP report for May (in several variations) and industrial production will become available. Industrial production is a secondary report, and GDP is more interested in the market in quarterly terms. However, unexpected values can cause a surge of emotions in the market. However, all these reports are unlikely to affect the overall mood of traders who are still set to buy only. Therefore, if the statistics are not in favor of the pound, then what we will see is another correction.
There will also be events of interest in America. On Monday, speeches will be given by Federal Reserve representatives - Daly, Mester, and Bostic, followed by James Bullard on Tuesday. On Wednesday, the crucial inflation report for June will be released, which may indicate a slowdown in the rate to 3.1%. Core inflation may decrease to 5%. Let's remember that the faster and stronger the inflation falls, the higher the likelihood of ending the monetary policy tightening cycle in May. Also, Neel Kashkari, Raphael Bostic, and Loretta Mester will give speeches on this day.
On Thursday, the producer price index, unemployment benefit claims, and a speech by Christopher Waller will be presented. The University of Michigan's consumer sentiment index will be released on Friday. We deliberately listed all the Federal Reserve directors' speeches, although not all of them will be important. None of them may provoke an immediate market reaction. However, the speeches that will be held after the inflation report publication will be of particular importance as officials may begin to hint at abandoning the plan to raise the rate twice more in 2023. The market, which is already reluctant to buy dollars, will have even fewer reasons to do so.
The average volatility of the GBP/USD pair over the past five trading days is 80 points. For the pound/dollar pair, this value is "average." Therefore, on Monday, July 10, we expect movement within the range limited by the levels of 1.2755 and 1.2915. A downturn in the Heiken Ashi indicator signals a new round of downward correction.
Nearest support levels:
S1 – 1.2817
S2 – 1.2756
S3 – 1.2695
Nearest resistance levels:
R1 – 1.2878
R2 – 1.2939
R3 – 1.3000
Trading recommendations:The GBP/USD pair in the 4-hour timeframe stays above the moving average. Long positions with targets of 1.2878 and 1.2915, which should be held until the Heiken Ashi indicator turns down, remain relevant. Short positions can be considered if the price consolidates below the moving average with targets of 1.2695 and 1.2634.
Explanation of illustrations:Linear regression channels - help determine the current trend. If both are directed in one direction, it means that the trend is now strong.
The 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 the pair will spend the next day, based on current volatility indicators.
CCI indicator - its entry into the oversold area (below -250) or the overbought area (above +250) means that a trend reversal in the opposite direction is approaching.