The GBP/USD currency pair on Friday also showed "super volatility" equal to 40 points. That is, both major currency pairs stood in one place almost all day. At the same time, they did not even try to start a downward correction, which is a very good sign for both of them. The upward trend continues, which is seen in the illustration above. Northbound traffic is slowing down, but that doesn't mean it's ending. Since the pound does not currently have strong geopolitical and fundamental growth factors, it also continues to increase solely on the technical factor. This factor can provide support for a long time since the entire negative market has had the opportunity to work out several dozen times already. And about the positive in recent weeks and months, it did not even remember. Recall that the Bank of England raised the rate four times, but the pound was still falling all the time. Thus, the absence of a new negative is already a positive for the British pound. But, unfortunately, a new negative is also possible.
We have already said recently that the United Kingdom and the European Union have once again recalled the "Northern Ireland Protocol" and now a trade war may even begin between them, which will be "very useful" in conditions of high inflation and geopolitical conflict in Eastern Europe. In addition, the energy crisis continues, and the food crisis may also begin. Of course, Europe and Britain will not starve, and they will not remain without gasoline, oil, and gas. However, this means that prices for all "scarce goods" will rise. And this means, in turn, that inflation will continue to rise, despite all the expectations of central banks that "they are about to start slowing down." Unfortunately, it should be recognized that inflation is now beyond the control of central banks. They cannot influence external geopolitical conflicts, the pandemic, the disruption of logistics chains, sanctions against Russia, and the map of hostilities in Ukraine. Thus, a new escalation of the conflict or simply its stretching over time will put pressure on the world economy in any case. If oil can be extracted in many countries of the world, sanctions can be lifted from Iran or Venezuela and "black gold" can be obtained from there, new deposits can be developed or nuclear power plants can be built to reduce dependence on hydrocarbons, then it will not work with crops, which form the basis of the nutrition of all mankind. You can't just start growing potatoes or wheat, for example, in Africa.
No one expects "surprises" from the Nonfarm report.
There is not a single significant event planned in the UK this week. Only on Wednesday will the index of business activity in the manufacturing sector be published, which is likely to remain unchanged. In any case, this is the second, final value for May, which is unlikely to differ much from the first. But there will be many more interesting events in the USA. First, as usual, there will be several speeches by Fed members during the week. Recently, their rhetoric differs from each other, but everyone agrees that the rate should continue to be raised and the issue of its growth by 1% at the next two meetings has already been practically resolved. Second, the ISM business activity index in the manufacturing sector will be published on Wednesday. This index is more important than standard indices. Third, the ADP report on changes in the number of people employed in the private sector will be released on Thursday. Fourth, NonFarm Payrolls, unemployment, and wages will be published on Friday. Naturally, the most important event of the week will be Friday Nonfarm. It makes no sense to try to guess what the value of this report will be. But on this day, there may be increased volatility of the pair. We do not believe that the macroeconomic background this week will have a significant impact on the movement of the pound/dollar pair. Now a lot depends on geopolitics and the foundation, which are unlikely to change during this week. Technology is still pushing the pair up, and macroeconomics can only influence the mood of traders within individual days.
The average volatility of the GBP/USD pair over the last 5 trading days is 88 points. For the pound/dollar pair, this value is "high". On Monday, May 30, therefore, we expect movement inside the channel, limited by the levels of 1.2585 and 1.2760. The reversal of the Heiken Ashi indicator downwards signals a round of corrective movement.
Nearest support levels:
S1 – 1.2634
S2 – 1.2573
S3 – 1.2512
Nearest resistance levels:
R1 – 1.2695
R2 – 1.2756
R3 – 1.2817
Trading recommendations:
The GBP/USD pair continues to form a new upward trend in the 4-hour timeframe. Thus, at this time, you should stay in open buy orders with targets of 1.2695 and 1.2756 until the Heiken Ashi indicator turns down. It will be possible to consider short positions if the price is fixed below the moving average line with targets of 1.2512 and 1.2451.
Explanations of the illustrations:
Linear regression channels - help to 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 - 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.
