The British pound corrected against the dollar in the last three days. Thus, the correction took on a rather protracted character, especially since the quotes failed to overcome the critical Kijun-sen line, which initially was not too far away. We can assume that now the pair's traders are at some crossroads. Bulls have no special reason to buy the British currency, especially after a sufficiently long strengthening of this currency (albeit a correction one). Bears are in no hurry with new sales. Thus, the next week will help market participants decide on the direction. We already mentioned in the EUR/USD article that there will be plenty of macroeconomic events in the coming week. This applies to the United States, but not to the UK. Great Britain will not publish important statistics throughout the trading week. Thus, all hope is for data from across the ocean. The first two trading days will be empty, if you do not take into account secondary indicators of the level of consumer confidence or the housing price index in the United States. The market will begin to receive critical and interesting information on Wednesday.
First, annual GDP data for the first quarter will be published in a preliminary estimate. According to experts, the main indicator of the state of the US economy will decrease by 4%. But we are not even interested in these figures, but in the discrepancy between the forecast values and the real one. After all, the actual value may be much lower. Since this indicator is quite important, traders can make an exception and work on this report. The release of relatively important indices of personal consumption expenditures and prices of personal consumption expenditures for the first quarter is planned for this day. However, we believe that market participants will not pay much attention to this data. The Federal Reserve will announce its decision on the key rate and a press conference will be held late in the evening. These events, along with the ECB meeting, will be the most important Market participants do not expect the key rate to be lowered (although there may certainly be surprises). So the main intrigue is what will Jerome Powell say in his speech after the FOMC meeting? We expect to receive information on the central bank's plans from Powell and Lagarde. Although the US government continues to pour trillions of dollars into the economy, judging by unemployment and many other indicators, the best it could do is to slow down the pace of economic decline. Thus, the US economy continues to need stimulus. And who, if not the Fed, should carry out this stimulation? Thus, Powell may hint at possible new concessions, and the Fed's inflation and GDP forecasts can help assess the magnitude of the impact of the pandemic on the US economy. In general, there will be a lot of information on Wednesday and all of it will be important.
There will be fewer macroeconomic publications on Thursday, but a single report may be enough to put pressure on the US currency. The next report on applications for unemployment benefits in the United States will be released on this day. The report, to which no one paid attention two months ago, has now become one of the most significant. An additional 3.5 million initial applications are expected in the week of April 24th. Thus, in six weeks, the total number of initial appeals will reach 30 million of the 160 economically active population in America. Many experts believe that the secondary applications for unemployment benefits are more significant. It displays the number of repeated applications from people who already receive benefits, that is, they are really unemployed. It is expected that the total number of secondary applications for the week of April 17 (this indicator is a week late) will be 18.1 million. Thus, this figure will exceed 20 million in a week. In general, the situation is disappointing and it will be difficult for the US currency to show growth next week against the euro and the pound. Another conversation is that the situation in European countries is no better. Thus, traders, if they begin to work out statistics, will analyze which country will experience a greater economic decline. If market participants continue to ignore the statistics with the same persistence, then everything will depend on the banal desire or unwillingness to buy the greenback which is considered the safest in times of crisis, next week.
At the beginning of the article, we wrote that no economic information is expected from the UK this week. But there will still be one report that can formally draw the attention of traders to itself. We are talking about the manufacturing index of business activity for April that is set to be released on Friday. However, its final value is unlikely to differ much from the preliminary one published earlier. Thus, most likely, it will collapse down to 32.4-32.8. The report on US business activity indices is also planned for this day. Markit is expected to reduce 36.4-36.9 in the manufacturing sector, while according to ISM - a reduction to 36.7-40.0. Thus, in general, the whole week will be a failure for both the British pound and the US dollar. The only question is which country will face the worst. The dollar is the number one candidate for a fall. But everything will depend on the actions and comments of the Fed, as well as on new statements by Donald Trump.
The last thing I would like to note is the resumed negotiations on Brexit. However, Michel Barnier said last week that London is not in a hurry with the proposal of alternative options, and rejects the proposals of Brussels. Thus, the chances of concluding agreements in at least some areas before July 1 are small. Boris Johnson (his government) again made a statement that the "transition period" will not be postponed, despite the pandemic and the crisis that it caused.
In technical terms, the pair began an upward correction against a downward trend. Thus, the downward movement has good chances to continue, if it does not interfere with the fundamental background. The Dead Cross sell signal from Ichimoku also remains relevant, with Bollinger bands pointing down.
Recommendations for the GBP/USD pair:
The pound/dollar is trying to resume a new downward trend. We still believe that some unease remains on the market, and the entire fundamental background is ignored. You should precisely focus on the technique. Consequently, as long as the pair is located below the critical Kijun-sen line, short positions with targets at 1.2276 and 1.2224 (will be reviewed at the opening of trading on Monday) remain relevant.
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