The GBP/USD currency pair still fell to the moving average line on Wednesday. However, even in the illustration above, it is clear that such a situation occurred several times during the current upward trend. Each time, the pound remained above the moving average. On the other hand, sooner or later, the upward movement of the pound, which is very difficult to call justified, should end. Yes, the British pound has had certain support factors recently. First, it is a high probability of an increase in the key rate of the Bank of England by 0.5% at once. Second, it is a positive report on GDP for the second quarter, which showed more growth than predicted. However, some important events in the States were bound to support the dollar - for example, the Fed's decision to raise the key rate by 0.75%. They had to, but they didn't support it. And that is why we believe that the pound has been growing in recent weeks, which is called "upfront." There was a need for technical correction, but it was the correction. Now this correction can be called significant so that it may be completed in the near future. If so, a new fall in the British currency will begin, leading to an update of its 2-year lows and an exit to historical lows around 1.1400. We believe that this scenario is still the most likely.

At the same time, it is worth noting that yesterday's fall in the pound sterling could be related to the "Taiwan" crisis. Nancy Pelosi visited Taiwan, but what will happen between Taiwan and China is still unclear. Beijing has announced naval exercises around the island, effectively blocking it. Also, the airspace over Taiwan is closed by the Chinese side. All this is very similar to an attempt to seize the island militarily, but let's not get ahead of ourselves and jump to conclusions. So far, nothing terrible has happened, but a new "hot spot" has appeared on the world map. And the pound and the euro, as risky currencies, immediately rushed down as soon as the "smell of fried." Everything is logical.

The BA meeting and the Nonfarm report guarantee a fun end to the week.

So much has already been said about the upcoming meeting of the Bank of England that it remains only to wait for the announcement of the results, tick the box and forget about it. Traders have already had a dozen opportunities to work out any increase in the BA key rate and the beginning of the central bank's balance sheet unloading program (analogous to the Fed's QT program). By and large, we can only say that the probability of a 0.5% rate hike has increased even more in recent weeks, as the latest GDP report turned out to be stronger than forecasts and showed that there is still "no smell" of a recession in the British economy. It means that the Bank of England can tighten monetary policy more confidently. And since three people voted for a 0.5% rate increase at the last meeting, there may be even more of them at this meeting. In principle, five votes are enough to raise the rate by 0.5%.

However, the pound may not feel any joy about this. As we have already said, this has not yet been announced, and the BA decision has been played out with a vengeance in recent weeks. Traders even happily ignored the Fed's rate hike by 0.75%, so we believe that we need to be prepared for the pound's fall. And not even today, but in the coming weeks, since the reaction to the fundamental background is usually long-lasting. Of course, we are dealing with the foreign exchange market, where the largest banks and companies conduct operations, so it is impossible to be 100% sure of something. We may be wrong, and the pound will grow even stronger today. However, we recall that there is a "technique" for such cases. The technical analysis indicates the continuation of the upward trend, and it is not worth selling the pound until the price is fixed below the moving average. Also, traders should remember that the reaction to the results of the meeting can last at least a day, so it will be possible to conclude by mid-Friday. And in the middle of Friday, the Nonfarm Payrolls report will be published in the States. A fun end to the week awaits us.

The average volatility of the GBP/USD pair over the last 5 trading days is 128 points. For the pound/dollar pair, this value is "high." On Thursday, August 4, thus, we expect movement inside the channel, limited by the levels of 1.2001 and 1.2258. A reversal of the Heiken Ashi indicator upwards will signal a possible resumption of the upward movement.

Nearest support levels:

S1 – 1.2085

S2 – 1.2024

S3 – 1.1963

Nearest resistance levels:

R1 – 1.2146

R2 – 1.2207

R3 – 1.2268

Trading Recommendations:

The GBP/USD pair continues to be located above the moving average on the 4-hour timeframe. Therefore, at the moment, new buy orders with targets of 1.2207 and 1.2268 should be considered if the price bounces off the moving average. Sell orders should be opened when anchoring below the moving average line with targets of 1.2085 and 1.2024.

Explanations of the illustrations:

Linear regression channels – help determine the current trend. If both are directed in the same direction, then the trend is strong now.

Moving average line (settings 20.0, smoothed) – determines the short-term trend and the direction in which trading should be conducted now.

Murray levels are target levels for movements and corrections.

Volatility levels (red lines) are the likely price channel in which the pair will spend the next day, based on current volatility indicators.

The CCI indicator – its entry into the oversold area (below -250) or into the overbought area (above +250) means that a trend reversal in the opposite direction is approaching.