4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - sideways.
CCI: -61.4457
The British pound continues to bounce from side to side. Quotes of the pair during the past day fell to the Murray level of "3/8" - 1.3519, but at the same time they could not continue the downward movement, so now a new round of upward movement can begin. At the same time, despite the ongoing "high-volatility swing", the upward trend also persists. The price is only some 150-200 points from the 2.5-year highs. And its location below the moving average line should not mislead anyone at all, because in recent months the price has overcome the moving average from all sides several dozen times. Each time, this did not lead to a change in the upward trend to a downward trend. Thus, in technical terms, nothing has changed.
Fundamentally, little has changed in recent weeks. After Brexit was officially completed, and trade negotiations with the European Union were crowned with success, those that are interested in traders of the pound/dollar pair became much less. Moreover, investors are now in some confusion. They are nervous, so the pair is thrown from side to side. Does it seem that most market participants do not understand what they should pay attention to now? The pound has grown significantly throughout 2020, but what's next? To buy the pound further means to assume that everything is good in the UK, and its economy is thriving. We have been paying attention for several months to the fact that the British economy was shrinking at the end of 2020 and will continue to shrink at the beginning of 2021. Thus, there is no reason for the British currency to grow in principle. Earlier, we said that the second "lockdown" will inevitably affect GDP in the fourth quarter. Now the UK has introduced the third "lockdown" and is also going to tighten it and extend it until mid-March. Therefore, no news about the vaccination of the population can be regarded as positive. Many states have already started vaccination to one degree or another. The entire adult population of Britain will be vaccinated by September, according to Boris Johnson. So the British economy has two more quarters to contract instead of growing. And this is even if no new strains of "coronavirus" are found that will not be affected by vaccines, which can also be. In general, the whole world has taken the first step towards victory over COVID-2019, but this is only one step. There are still many such steps to be taken.
Add to this the losses that the British economy will suffer in any case due to Brexit, due to the lack of points in the trade agreement regulating the services sector, which is of great importance for the British economy. And these are only the most important and pressing, but purely economic problems of Great Britain. If we also recall the "Scottish discontent", then the prospects become quite vague.
And the "Scottish discontent" can and should be remembered always. If Scotland is not already walking on the edge of its Brexit, it is ready to start it at any moment. The Scottish National Party, led by Nicola Sturgeon, has high support at home. Many Scots support the independence referendum and the idea of returning to the European Union. However, Nicola Sturgeon's party can wait until May to further strengthen its position at home. In May, the next parliamentary elections will be held, in which the SNP can win by an even larger margin than in the previous elections. Various studies show that the Scottish National Party can win 71 seats in Parliament out of 129. That is, more than half. This will give her almost complete power, no dependence on the opposition, as well as an extra trump card in negotiations with London on granting the right to hold a new referendum.
So no matter how much we try to find anything positive for the British pound, we still don't find it. Also, we can not find any reasons why the British currency continues to hold such high positions. Even the euro has already started to decline, but not the pound. Thus, it is no longer even a matter of low demand for the US dollar. The latest COT report showed that professional traders have opened more than 10 thousand new buy contracts. What are they based on? From our point of view, the growth of the pound is exclusively "speculative", the currency itself is very overbought. Thus, we do not expect anything but a fall. However, once again we remind you that all fundamental theories do not make any sense without technical evidence. Therefore, as long as the upward trend persists, you need to trade for an increase. The problem is that in technical terms, everything is also very ugly for the pound/dollar pair. The price is regularly fixed below and above the moving average, which further complicates the process of analysis and forecasting. All this should be clearly understood by traders before opening any positions on the pound sterling at this time.
The average volatility of the GBP/USD pair is currently 111 points per day. For the pound/dollar pair, this value is "high". On Tuesday, January 19, thus, we expect movement inside the channel, limited by the levels of 1.3468 and 1.3690. The reversal of the Heiken Ashi indicator to the top signals a new round of upward movement within the framework of the ongoing "swing".
Nearest support levels:
S1 – 1.3550
S2 – 1.3519
S3 – 1.3489
Nearest resistance levels:
R1 – 1.3580
R2 – 1.3611
R3 – 1.3641
Trading recommendations:
The GBP/USD pair has started a new round of upward movement on the 4-hour timeframe. Thus, today it is recommended to trade for an increase with the targets of 1.3641, 1.3672, and 1.3702 if the price overcomes the moving average. It is recommended to consider sell orders with targets of 1.3519, 1.3489, and 1.3468 if the price bounces off the moving average line.
