4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - downward.
Moving average (20; smoothed) - downward.
CCI: -123.2605
The British pound was trading fairly calmly on Wednesday, although the price changed direction several times during the day. However, in general, the overall trend remained the same - downward. This happened after the bears managed to return the pound/dollar pair below the moving average line. However, it is difficult to say now what awaits the pair in the future. The pound continues to be dependent on speculators, who in the last year have brought it to very high levels of value relative to other currencies. Now, for the exchange rate to start falling (in the long run), speculators must start closing long positions. However, as the latest COT reports have shown, it cannot be said that the number of speculators (a group of "Non-commercial" traders) is now too large. However, the number of buy contracts is still twice as high as the number of sell contracts for non-profit traders, so the overall bullish mood remains. Let us add to this the exorbitant inflation of the money supply in the US and we get the reason why the British currency is so high. However, it is quite difficult to guess what the speculators will do next. For example, such a situation is possible: the money supply in the United States will continue to inflate by trillions of dollars, which should cause a natural fall in the dollar (the growth of the pound/dollar pair), but at the same time speculators will begin to massively dump purchase contracts, which will lead to the strengthening of the US currency. Roughly speaking, now there is a confrontation between two global factors in the pound, and it is quite difficult to predict the outcome of this confrontation. Thus, we recommend paying special attention to the technical picture, since it is the "technology" that reacts to what is happening most quickly.
Meanwhile, the finance ministers of the G-20 countries supported the idea of Janet Yellen to introduce a minimum single corporate tax for all countries. It is not only for the G-20 countries but for all countries of the world. According to Janet Yellen, over the past 30 years, many countries around the world have fought a fierce battle for multi-corporations, constantly lowering taxes to attract those to themselves. Now it is time to stop senseless competition, which only empties the state treasury. It is noteworthy that the proposal from Janet Yellen followed just when America planned to raise the corporate tax from 21% to 28%. That is, first of all, such an initiative is beneficial to the United States itself. For example, Irish Finance Minister Paschal Donohoe said during the G-20 meeting that any new rules and rates should take into account the size of a particular economy. He said the Irish government may have strong claims to a single corporate tax. In principle, the Irish Finance Minister has made clear the position of the world's smallest, developing, and poorest countries. It is obvious that developed countries, such as the United States or France, or Germany, will benefit if the corporate tax is the same in all countries of the world and large corporations do not flee from countries with high taxes to countries with low taxes, registering their business there. However, this is not profitable for small countries and offshore companies, such as Cyprus, which, due to such attraction of multi-corporations and companies, can be said to live. All the same, the business sends some deductions to the local treasury, and there are no multi-corporations and serious production in Cyprus. Therefore, it is unlikely that such an initiative will find approval in countries with small GDP and low production levels. However, there is no doubt that such an instrument as sanctions will come into force, and all those who oppose "changing the world for the better" will immediately fall under them.
As for the fundamental background from the UK, it is now practically absent. Nothing new is happening in the country, so there is simply no impact on the foreign exchange market. The Fed minutes from the last meeting were published the night before last, but as usual, there was no interesting information in it. The Federal Reserve is not going to change its monetary policy in the near future and is not going to reduce or curtail the program of quantitative easing. Jerome Powell will wait for the unemployment rate to reach pre-crisis levels and the full recovery of the labor market. The minutes of the Fed meeting showed that most economists still view the pandemic as a serious threat to economic recovery. However, it's all lyrics. All these concerns and expectations did not affect the dollar exchange rate.
In general, this whole week turned out to be very empty in macroeconomic and fundamental terms, and today the situation will not change completely. No major reports will be published in the UK during the day, and no major events are scheduled. It's the same in the States. Thus, when making trading decisions, traders will need to rely on technical analysis. We present a detailed analysis of the intraday daily, and we recommend that you read it.
The average volatility of the GBP/USD pair is currently 88 points per day. For the pound/dollar pair, this value is "average". On Friday, April 9, therefore, we expect movement within the channel, limited by the levels of 1.3652 and 1.3828. The reversal of the Heiken Ashi indicator back to the top can signal a new round of upward movement.
Nearest support levels:
S1 – 1.3733
S2 – 1.3702
S3 – 1.3672
Nearest resistance levels:
R1 – 1.3763
R2 – 1.3794
R3 – 1.3824
Trading recommendations:
The GBP/USD pair started a downward movement on the 4-hour timeframe. Thus, today it is recommended to stay in the sell orders with the targets of 1.3702 and 1.3652 until the Heiken Ashi indicator turns up. Buy orders should be opened in case of overcoming the moving average with the targets of 1.3855 and 1.3885 and keep them open until the Heiken Ashi indicator turns down.
