4-hour timeframe
Technical details:
Higher linear regression channel: direction - downward.
Lower linear regression channel: direction - downward.
Moving average (20; smoothed) - downward.
CCI: -173.6052
The British pound starts the fourth trading day of the week in a downward movement inside the same 400-point side channel, continuing to approach its lower border. Thus, in the near future, the pound/dollar pair may be followed by an upward reversal with further movement to the area of the Murray level of "7/8"-1.2634. At the same time, the pair can overcome the lower border of the channel and thus start forming a new downward trend. We note that the lower border of the channel has an indistinct price value and can run even at the level of 1.2165 – the minimum from April 7. The CCI indicator is getting closer to the "-200" area, entering which can serve as a strong signal to turn up.
In the article on the euro/dollar, we talked about two epics that are starting now in the United States. The first and most important of them is a new confrontation between China and the United States, which can turn into a new trade war and the introduction of mutual sanctions and restrictions. Earlier, we said that Donald Trump believes China is to blame for the spread of the COVID-2019 virus across the planet, and also accuses Beijing of misinformation and belatedly releasing all the details of the virus. Thus, according to the leader of the United States, Beijing must be held accountable. As a punishment, Washington considers various measures, ranging from the introduction of new trade duties, ending with international courts, and the demand for compensation. According to the latest information, the US leader's threats were not ignored by Congress and the Senate and were not unfounded. The US government supports the initiative of Trump "to recover to the fullest extent" with China. US Senator Lindsey Graham introduced a bill that allows for sanctions against China for the spread of "coronavirus". The draft law "on responsibility for COVID-19" proposes to impose sanctions if Beijing does not provide a full report on what happened in Wuhan. "I am sure that without the deception of the Chinese Communist party, the virus would not have existed in the United States. China refuses to allow the international community to investigate the laboratory in Wuhan. They prohibit an investigation into how the outbreak started. I am sure that China will never cooperate if it is not forced to," Senator Graham said. It is reported that 8 more Republican senators supported the bill. Senator Graham believes that if China does not provide all the necessary information, the United States can freeze Chinese assets, ban Chinese officials from entering the United States, revoke visas, prohibit financial organizations from issuing loans to any Chinese individuals and legal entities, and prohibit Chinese companies from placing their securities on the American stock market. At the same time, it is also reported that representatives of the US Democratic party do not support the introduction of new sanctions and duties against China.
According to many political analysts, such a step on the part of Trump's followers from the ranks of the Republican party may help their leader to "whitewash" himself a little. Many Americans now think that the government failed to fight the "coronavirus" and blame it on Trump. In addition, the absolute majority of US residents do not support the early completion of "lockdown", which can lead to new outbreaks of the pandemic throughout the country. Thus, the US leader seems to continue to push the idea of "China's guilt" into the American masses. In fact, he has no other choice. Americans should fully believe that China is responsible for 80,000 deaths and more than 1 million illnesses. The Democratic party, which has always been loyal to China, may also suffer from such actions by Trump. The US President can use this loyalty to denigrate the candidacy of Joe Biden, who has always been very friendly to China. However, there is one "but". Any sanctions that Washington decides to impose will most likely be duplicated by China itself against the United States. You can't punish China unilaterally without hurting yourself. Thus, the introduction of any sanctions by Washington potentially threatens a new round of trade and not only conflict between Beijing and Washington. If the sanctions are not economic in nature, then this is still half the trouble. But if new duties are imposed and old agreements are torn up, this will cause an additional blow to the global economy.
However, most experts are inclined to believe that Donald Trump will not start a new trade and economic war with China in the near future. A new war means new losses, and the American economy is already not in the best condition. A new decline, especially caused by the trade and economic war, will definitely be associated with the name of Donald Trump and his political ratings will fall even more.
On the fourth trading day of the week, a small number of macroeconomic publications are planned in America, and in the European Union and the UK, they will not be at all. In the United States, the next report on applications for unemployment benefits for the week of May 8 will be released. According to forecasts, another 2.5 million Americans will apply for benefits during this week, and the number of secondary applications for benefits will reach 25.1 million as of May 1. Thus, we do not expect positive news tomorrow from overseas. So far, the British pound continues to fall in price against the US currency. However, firstly, most of the macroeconomic information continues to be ignored by market participants, and secondly, the pound/dollar pair remains within a wide side channel and has not yet left it. Therefore, technical factors remain the most important when determining the direction of trading.
Meanwhile, the UK came out on top in the European Union in the number of cases of the COVID virus-2019. The total number is 231,000. The total number of deaths from the pandemic is 33,263 and this is also the worst figure in Europe. Despite this, the quarantine in the UK is easing and in this country is very similar to America, where there are also not too many signs of slowing down the epidemic, but the authorities are trying to complete the "lockdown" as soon as possible. In fact, why be surprised if these two countries are ruled by friends Boris Johnson and Donald Trump, who regularly flatter each other and want to be friends with each other?
The average volatility of the GBP/USD pair has increased slightly in recent days and is currently 130 points. For the pound, this is still not too much, and there are no signs of a serious increase in volatility yet. On Thursday, May 14, we expect movement within the channel, limited by the levels of 1.2108 and 1.2368. A reversal of the Heiken Ashi indicator upward will indicate a new round of upward movement.
Nearest support levels:
S1 – 1.2207
S2 – 1.2146
S3 – 1.2085
Nearest resistance levels:
R1 – 1.2268
R2 – 1.2329
R3 – 1.2390
Trading recommendations:
The GBP/USD pair continues its downward movement on the 4-hour timeframe. Thus, formally, sell orders with targets of 1.2146 and 1.2108 remain relevant now, but the downward momentum may dry up around the mark of 1.2165. On the approach to the lower border of the side channel, we believe it is not advisable to sell the pair. It is recommended to buy the pound/dollar not before fixing the price back above the moving average with the first goals of 1.2390 and 1.2451.
