4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - sideways.
CCI: -12.1970
The British pound sterling paired with the US currency began another round of decline in trading on Wednesday, January 6. However, the "next fall" so far looks standard. It was after such turns of the downward movement that the pound/dollar pair then resumed the upward trend and updated the 2.5-year highs. Thus, for the time being, it is not necessary to make premature conclusions that the upward trend is complete. We have been expecting its completion for several months now simply because there is no fundamental reason for the pound to continue growing. Moreover, it is the pound sterling that now looks the weakest of the major currencies, the currency whose issuing country is experiencing serious economic problems. Even despite reaching an agreement on Brexit. The mode in which the pound is traded is still most similar to the "high-volatility swing". Thus, now the pair can easily go down 200-250 points, and then resume the upward trend.
Meanwhile, the third "wave" of the pandemic is gaining momentum in the UK. On January 5, the next "coronavirus" anti-record was updated, during this day about 61,000 Britons were infected. The fact that the country has already introduced the third "lockdown", so far, does not affect the number of cases of the disease. The UK is now far ahead of countries such as France, Italy, Spain, Russia, and others in the number of new cases per day. Thus, it is the UK that is again suffering from the pandemic most severely among European countries. Recall that during the first "wave" it was in Britain that the largest number of deaths from the "coronavirus" was recorded, as well as one of the largest values of the number of infections. As we can see, in the second and third "waves", the situation does not change much, although the government had to conclude. However, although Boris Johnson is not afraid to introduce a new "lockdown", so far it is impossible to give him a high rating for the fight against COVID-2019. This means that dissatisfaction with his government will grow among the British. However, neither these problems nor economic ones put any pressure on the pound sterling. Even the fact that the British economy will shrink in the fourth quarter of 2020 and the first of 2021 does not frighten buyers of the British currency.
Meanwhile, it can be assumed that the strengthening of the US dollar on Wednesday had reasons related to the States. Let's try to figure it out. Macroeconomic statistics from overseas were not in favor of the US currency. What else has happened in the US that the euro and the pound have fallen in sync over the past day? Only the news that the Democrats can win in Georgia and thus form a majority in the Senate. But since when does the dollar show growth on the news about the strengthening of the Democrats' positions in the government? Recall that for the last 2 months, the Democrats have only been resting after winning the election. All this time, the American currency has been declining despite everything. And then suddenly it turns out that the Democrats can form a majority in the Senate and control the entire Congress and the White House and the dollar began to grow? Absurd. Thus, we believe that the pound and the euro on Wednesday fell banally for technical reasons. A banal rollback to buy more at a more favorable rate. The upward trend is still maintained and nothing can be done about it.
Meanwhile, Britain has begun vaccinating the population against COVID-2019. It is reported that about 1.3 million people have been vaccinated throughout the country. It is also reported that more than half of this number was due to vaccinations of people over 80 years of age. This is good news, however, the pound began to fall. Thus, the positive news about the "coronavirus" and the fight against it has nothing to do with it.
It should also be noted that most of the world's media continue to insist that Brexit will leave an indelible mark on Britain. We already wrote about Scotland and its possible exit from the EU yesterday. However, the issue of the island of Ireland is becoming more acute. Recall that the "hard" border between Ireland and Northern Ireland will not appear, however, when crossing the Irish Sea, many goods will be subject to customs checks. There will also certainly be some difficulties when crossing the EU border with the UK. Simply put, the Northern Ireland border. Thus, many experts expect a serious deterioration in the mood in the Foggy Albion. So far, only Wales has shown no concerns. From a technical point of view, the upward trend persists and this is signaled by both linear regression channels. Also, the pair can not yet go much below the moving average line. Thus, even the consolidation of quotes below the moving average does not guarantee a strong decline, although we expect it within the "highly volatile swing". However, the movement of the pound now defies logic and analysis, so you need to be ready for absolutely any scenario. Perhaps it is better to use lower timeframes in trading now and try to filter out weak signals.
The average volatility of the GBP/USD pair is currently 120 points per day. For the pound/dollar pair, this value is "high". On Thursday, January 7, thus, we expect movement inside the channel, limited by the levels of 1.3484 and 1.3724. The reversal of the Heiken Ashi indicator to the top signals a new round of upward movement within the "swing".
Nearest support levels:
S1 – 1.3550
S2 – 1.3489
S3 – 1.3428
Nearest resistance levels:
R1 – 1.3611
R2 – 1.3672
R3 – 1.3733
Trading recommendations:
The GBP/USD pair on the 4-hour timeframe is now in a new round of downward movement. Thus, today it is recommended to open new long positions with targets of 1.3672 and 1.3724 if the price bounces off the moving average or the Heiken Ashi indicator turns up. It is recommended to trade the pair down again with the targets of 1.3489 and 1.3428 if the price is fixed below the level of 1.3550. In general, the pair is now continuing to "swing".
