The GBP/USD currency pair continued to trade identical to the EUR/USD pair on Thursday. In the last three weeks or even more, both pairs have shown almost perfectly similar movements, which may differ only in volatility. Yesterday, for example, the pound sterling also began to adjust against the fall on Tuesday and did so throughout the day. There were also no planned macroeconomic events or fundamental data in the UK, and the ADP report in the US did not provoke any market reaction, unlike the ISM business activity index released a day earlier. Everything we wrote in the euro/dollar article is almost 100% applicable to the pound/dollar pair. At this time, traders are trading only the dollar. The euro and the pound simply depend on the mood of traders in relation to the US currency. There is simply no important news from the European Union and the UK right now. There are important and topical topics, but they do not affect the movement of both pairs.
For example, take the problem of the "Northern Ireland Protocol" in the UK. We believe that this is a British problem since, in the event of a trade war, it is the economy of the Kingdom that will be more damaged. But did the pound fall due to the emergence of this problem in May 2022? No, it moved identically to the European currency, for which this "protocol" is of much less importance. Plus, it's worth remembering that for Britain, compliance with the Brexit agreement with the European Union is very important from the point of view of a future trade agreement with the United States. However, Nancy Pelosi and Joe Biden have already made it clear to Boris Johnson that non-compliance with the EU deal is likely to complicate negotiations on a trade deal with the United States and even Washington's rejection of it. Well, I'm even tired of talking about the monetary policies of the Fed and the BA. In this matter, too, absolutely nothing is changing and there is reason to assume that we are now continuing to observe a "purely technical" correction, which is practically not affected by the "foundation" and "macroeconomics" in any way.
Since there is no news, let's talk about geopolitics
Two more very important topics that are now being widely discussed in the world community are the blocking of the oil embargo by Hungary and the blocking of Finland and Sweden's accession to NATO by Turkey. In each of these cases, the refusenik countries justify their decision. We have already written about Hungary and its prime minister many times. Let's analyze Erdogan's actions. The Turkish President believes that Finland and Sweden sponsor terrorism, I support the Kurdistan Workers' Party, which Turkey is at war and considers a terrorist organization. Note that no other NATO state considers the Kurds to be terrorists. That is, the problem of the Kurds is exclusively a Turkish problem. They have disputed territories and unresolved geopolitical issues. Now a completely reasonable question arises - if only Turkey considers Kurdistan a terrorist organization, then Finland and Sweden can also consider the whole of Turkey a terrorist state. We want to say that this is only the opinion of one country and not the opinion of the majority of NATO members. Therefore, there is a situation identical to the situation with Hungary and the oil embargo, when one country simply does not support the initiative of all other members of the bloc. Turkey is also not a clear ally of Ukraine and a clear opponent of Russia. Ankara is trying to balance between two fires in order not to impose sanctions against the Russian Federation (which will also hit its economy), and at the same time not to cross the path of NATO, the States of the European Union. Now Turkey's position is clear as day. If Budapest wants to bargain for economic preferences for itself and get more money in exchange for giving up Russian oil, then Ankara wants to lift the ban on arms exports from Sweden and Finland, as well as gain access to American F-35 fighter jets, which, according to the US decision, are not supplied to Turkey. Thus, as we can see, we are simply talking about blackmailing large international alliances to gain benefits for themselves and their country. Now we are watching what steps the EU and NATO will take.
The average volatility of the GBP/USD pair over the last 5 trading days is 95 points. For the pound/dollar pair, this value is "average". On Friday, June 3, thus, we expect movement inside the channel, limited by the levels of 1.2468 and 1.2658. The reversal of the Heiken Ashi indicator downwards signals a new round of downward movement.
Nearest support levels:
S1 – 1.2512
S2 – 1.2451
S3 – 1.2390
Nearest resistance levels:
R1 – 1.2573
R2 – 1.2634
R3 – 1.2695
Trading recommendations:
The GBP/USD pair continues to be located below the moving average line on the 4-hour timeframe. Thus, at this time, new sell orders with targets of 1.2468 and 1.2451 should be considered in the event of a price rebound from the moving average. It will be possible to consider long positions again if the price is fixed above the moving average line with targets of 1.2634 and 1.2658.
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 to trade now.
Murray levels - target levels for movements and corrections.
Volatility levels (red lines) - the likely price channel in which the pair will spend the next day, based on current volatility indicators.
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.
