It goes without saying that the UK has notched success in the mass vaccination nationwide. Such progress has not gone unnoticed. Citing British healthcare officials, the Kingdom has already reached the peak of the third pandemic wave. As of now, the country has already vaccinated the milestone 10 million people that make up almost 15% of the population.
The UK is now watching declining rates of new coronavirus cases as well as lower hospital admittance and the death toll, Chief Medical Officer for England Chris Whitty said at a televised press conference on Wednesday.
Nevertheless, Chris Whitty warned that the infection is still raging across the country. The national healthcare services could slip back into appalling conditions if social restrictions are lifted.
At the moment, the UK authorities aim to provide 15 million Britons with jabs. Once this target is reached, the government will be able to consider the ways of relaxing restrictive measures.
Importantly, earlier Boris Johnson and the secretary of state for the Home Department have already discussed the scenario is lifting lockdown measures. They came to terms that restrictions on businesses and individuals could be eased notably not until the summer 2021.
Today on February 4, the highlight of the European session is a regular policy meeting of the Bank of England. The odds are that the central bank will stand pat, keeping all settings of monetary policy unchanged. The focal point will be a quarterly forward guidance from the Bank of England as the market is wondering whether the central bank will eventually dare to introduce negative interest rates.
What's going on in the chart?
GBP/USD has got stuck in the range of 1.3650 – 1.3750 for over two weeks. Meanwhile, the single European currency has entered a downward correction phase. The pound sterling has been trading under extremely overbought conditions. The last time when the sterling made a correctional decline was in early September 2020.
In other words, GBP/USD has been trading at elevated levels. Eventually, this will force traders to slash long positions, thus entailing massive sell-offs and a deep fall of the pound sterling.
I mean nowadays there is a strong likelihood that GBP will slump by hundreds of pips sooner or later.
Working on senior timeframes, a lot of traders note that the ongoing medium-term trend climbed to the highest levels of the previous trend last seen in 2018.
This could signal that the time is ripe to revise a trading strategy. Indeed, traders could be braced for the imminent trend reversal.
Prospects and market expectations
Bearing in mind the current price fluctuations, it is clear that the lower border of the trading range of 1.3650 - 1.3750 has been ruined by selling pressure. The pair is moving towards the first downward target of 1.3535. Traders have been expecting such developments for a few weeks. Meanwhile, a lot of traders have already gained profits from short deals. First take profits are projected at near 1.3520/1.3535. Further short trades will be executed as the price holds firmly at the levels below 1.3500 that will open the door towards 1.3450 – 1.3300.
Thus, my forecast means a formation of a full-fledged correctional decline which has not been seen in the market for 4 months.
Indicator analysis
Analyzing various timeframes, we grasp the point that technical tools on a 1-minute and 1-hour charts clearly signal selling opportunities amid a rapid downtrend. A daily timeframe used to signal the overall uptrend for a long time. Nevertheless, now the daily chart reveals a change in trading sentiment because the sideway channel of 1.3650/1.3750 has been broken downwards.
Volatility measure per week/month/quarter/year
The volatility measure logs an average value per month/quarter/year
(The chart as of February 4 is plotted at the time of preparing this material)
The current dynamic is measured at 80 points that is 25% lower than yesterday's dynamic. Volatility is still increasing ahead of the policy meeting of the Bank of England and amid speculative trading.
Volatility measurements
Per month: 104.0
Per quarter: 127.0
Per year: 131.0
Average daily candle: 120.76 pips
Key levels
Resistance levels: 1.3650**; 1.3750**; 1.3850; 1.4000***; 1.4350**
Support levels: 1.3300; 1.3000***; 1.2840/1.2860/1.2885; 1.2770**; 1.2620; 1.2500; 1.2350**; 1.2250; 1.2150**; 1.2000*** (1.1957)
* Periodic level
** Levels of trading range
***Psychological level
