4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - downward.
Moving average (20; smoothed) - downward.
CCI: -31.8807
The British pound, paired with the US dollar, also fell. And on Monday, it began an upward correction. At this time, the pound/dollar pair completely repeats the movement of the euro/dollar pair. However, the fundamental patterns of the two major currency pairs are slightly different. The Eurozone economy did not fall as much during the crisis as the British one. In addition, the eurozone economy did not experience any shock due to Brexit. But the British economy did suffer very severely during the pandemic and Brexit, so it was bizarre to see the strong growth of the British pound in the last 15 months. However, as we have already said, the macroeconomic data was ignored mainly by traders, so the pound also grew on the factor of pouring huge sums of money into the American economy. There was also a "speculative" factor for the pound for some time, which did not even allow it to adjust down usually. However, the basis of traders' optimism about the pound is still unclear. Now, when the British currency is falling, it turns out to be a very strange picture.
On the one hand, the pound has long been too overbought, and its fall was expected for a long time. On the other hand, why now and why such a strong drop? It seems that everything that has been happening in the market in recent days is just some unfortunate combination of circumstances, nothing more.
What should you pay attention to this week? Of course, first of all, we pay attention to the meeting of the Bank of England, which will be held on Thursday. No one expects that the British regulator will start shouting about curtailing the QE program or raising the rate. However, as in the Fed's case, there are specific hints of a possible tightening of monetary policy. As in the case of the Federal Reserve, it is unlikely that the exact timing of the curtailment of the quantitative stimulus program will be announced. But the market is now overly excited, so even half-hints may be enough for the pound to go up 300 points. In general, it is the meeting of the Bank of England that will be the "event of the week." As for other statistics from the Foggy Albion, it will be as uninteresting as from the United States or the European Union. On Wednesday, the indices of business activity in the services and manufacturing sectors will be published at very high values. Thus, they are unlikely to change much. And if there are no changes, it is unlikely that there will be a reaction to this data. And beyond that, there are no more major events planned in Britain.
Of course, perhaps an important role in the movement of the pound/dollar currency pair this week will be played by American statistics or the speech of Jerome Powell. But we are inclined to believe that the news from America will not cause any reaction from traders. Jerome Powell spoke after the Fed meeting, after which the US dollar rose by more than 300 points, paired with the pound. It is unlikely that he will tell anything new to traders. And from the significant reports, you can't even isolate anything. It is unlikely that there will be reports on business activity. The GDP report looks attractive. However, it will be the third and final estimate for the first quarter, so it is unlikely to differ much from the previous forecast, which is 6.0-6.4%. The same applies to the report on orders for long-term products. This report was once very important and regularly provoked strong movements of the dollar. However, in the last 15 months, no one pays attention to it. Thus, we believe that this time there will be no special reaction of the markets to it. Data on applications for unemployment benefits, personal income, and expenses of Americans have not caused any market reaction for a long time. Thus, there are not so many really important events this week. However, there will still be a few that can theoretically affect the pound/dollar pair.
Also, I would like to say separately about the situation with the "coronavirus" in the UK. Although Britain is one of the first places in the world in terms of the rate of vaccination of the population, recently there has been an increase in new diseases. In the last few days, this figure has grown to 10,000 new cases per day. Of course, this can hardly be called a full-fledged third "wave." However, the British government has something to think about, and this time it did not take any risks and extended the quarantine restrictions for another month, specifying that, if necessary, the quarantine will be extended again.
Thus, the British currency has so far stopped near the 38th level, and at the moment, everything looks as if it was just taking a boost before breaking through the level of 1.4240, from which it bounced twice in 2021, and which is the 3-year high of the pair. So far, the price is located below the moving average line, so the downward trend continues, and there is no doubt. At the same time, such collapse trends very rarely continue in the same way. It should be understood that the stronger the movement, the less long-term it usually is. Thus, we expect the pair will return to the moving average in the coming days and possibly overcome it.
The average volatility of the GBP/USD pair is currently 133 points per day. For the pound/dollar pair, this value is "high." On Tuesday, June 22, we expect movement within the channel, limited by the levels of 1.3793 and 1.4059. A reversal of the Heiken Ashi indicator to the top will signal a possible new round of downward movement.
Nearest support levels:
S1 – 1.3855
S2 – 1.3794
S3 – 1.3733
Nearest resistance levels:
R1 – 1.3916
R2 – 1.3977
R3 – 1.4038
Trading recommendations:
The GBP/USD pair started an upward correction on the 4-hour timeframe. Thus, today it is recommended to open new sell orders with targets of 1.3855 and 1.3794 in the event of a reversal of the Heiken Ashi indicator down. Buy orders should be opened if the price is fixed above the moving average with targets of 1.4038 and 1.4099.
