The GBP/USD currency pair continued its sluggish upward movement on Monday, within the same sideways channel of 1.2634–1.2787. Thus, the market situation remained unchanged after the week's first trading day. The pair is again moving toward the upper boundary of the sideways channel, which is of no real significance. It is important to note that there are better times to trade than in flat markets. Even if there is a rebound from the 1.2787 level (the fifth time already), it doesn't mean that the pair will drop to the 1.2634 level in the next few days. The average volatility for the last five trading days is 75 points, which is very low for the British currency. And most importantly, it continues to decrease. Therefore, there are better times to open positions than this.
The picture is even more evident in the 24-hour time frame. After another annual high update, the price corrected by 500 points but didn't even attempt to break through the Ichimoku cloud. Thus, there is no reason to expect the beginning of a new downward trend at this time. We have only witnessed another mundane pullback that doesn't cancel the upward trend. This means that the pound's growth (illogical and unfounded) can resume at any moment.
The fact that there is no basis for further strengthening the British currency does not concern the market too much. It still needs to hurry to buy dollars and sell pounds. And such a situation could persist for a long time as the market continues to interpret many factors against the US currency. By the end of the year, it may even resume selling the dollar, as the Federal Reserve may signal its readiness to ease monetary policy by then.
The Bank of England is likely to raise rates again.
No major events are planned in the UK this week, but the strong macroeconomic background from the previous two weeks has not had any impact on the pair's movement. Again, we mean the impact that would end the flat market. What difference do strong and resonant reports make if the pair has been trading flat for three weeks? Business activity indices may only provoke a small reaction, and Jerome Powell's speech is only scheduled for Friday. Andrew Bailey will likely also speak that day, but such an entry must still be listed in the calendar.
The market is already considering September, when the Federal Reserve may take its second pause in tightening monetary policy, and the Bank of England is likely to raise the key rate again. If this factor helps the pound to resume its upward trend, we will be forced to conclude once again about the illogicality of the movement. Recall that the Fed has been raising rates for over a year, and the dollar has been falling against the British currency all year. Even if we assume that the Fed's tightening was factored in beforehand, why has the BOE's tightening yet to be completed? From a technical point of view, the pound has an excellent chance of resuming global growth. From a fundamental point of view, there is no basis for new purchases. We advise traders to consider the Senkou Span B line in the 24-hour timeframe. If it is breached, the pair could experience a sharp drop in the year's second half.
The average volatility of the GBP/USD pair over the last five trading days is 75 points. For the pound/dollar pair, this value is considered "average." Therefore, on Tuesday, August 22, we expect movement within the range limited by levels 1.2697 and 1.2847. A downward reversal of the Heiken Ashi indicator will signal downward movement within the sideways channel.
Nearest support levels:
S1 – 1.2756
S2 – 1.2726
S3 – 1.2695
Nearest resistance levels:
R1 – 1.2787
R2 – 1.2817
R3 – 1.2848
Trading recommendations:
The GBP/USD pair in the 4-hour timeframe is above the moving average, but it remains in a flat market overall. You can trade now on a rebound from the upper (1.2787) or lower (1.2634) boundaries of the sideways channel, but reversals may occur without reaching them. The moving average may be breached very often, but it does not indicate a change in trend.
Explanation of illustrations:
Linear regression channels help determine the current trend. If both are directed in one direction, the trend is currently strong.
Moving average line (settings 20.0, smoothed) - determines the short-term trend and direction in which to trade 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 overbought area (above +250) means a trend reversal in the opposite direction is approaching.