Overview of the GBP/USD pair. May 5. The UK is calling on countries around the world to join forces to create a vaccine against

4-hour timeframe

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Technical details:

Higher linear regression channel: direction - downward.

Lower linear regression channel: direction - sideways.

Moving average (20; smoothed) - sideways.

CCI: -58.7810

The British pound started the new trading week with consolidation below the moving average line. Thus, the trend has changed to a downward one and short positions are now relevant. There was no major news from the UK on Monday. We can only note the fact that the rate of spread of "coronavirus" in the Nebula remains quite high. However, traders are now more interested in the technical picture and the overall geopolitical situation in the world. We believe that China and the United States are on the verge of a new conflict, which this time may not just be a trade conflict. Accordingly, we can expect anything from these two countries now. And the demand for the US dollar is growing at the beginning of the week, as traders flee from risky assets.

The spread of "coronavirus" disease in the UK, if it is decreasing, then at a very low rate. Over the past day, 4,339 new cases of infection were recorded, which is only a few hundred less than the day before. Now the UK is "chasing" Italy and Spain, where 211,000 and 217,000 cases of "coronavirus" have been recorded, but in both these countries there is a decrease in the growth rate of disease, and quarantine measures are beginning to weaken. Thus, until May 26, when, according to preliminary information, London will begin to relax measures in the Foggy Albion, Britain can reach the net second place in the world for infection with the "Chinese infection". This is the price for not taking the epidemic seriously. By the way, the closest friend of the ruler of Great Britain Boris Johnson - Donald trump - leads the country, which is in first place in the world in terms of mortality and morbidity of "coronavirus". It is not surprising that in such circumstances, London is most interested in creating a vaccine as quickly as possible. Prime Minister Johnson considers this an issue of global significance and calls on all countries of the world to unite. "To win the battle against the virus, we need to work together to create an invulnerable shield that protects citizens. This can only be achieved by producing the vaccine on an industrial scale. The faster we join forces and share our experience, the faster scientists will succeed. The race to create a vaccine to fight this virus is not a competition between countries, but the most important task of our lives. We are talking about the confrontation between humanity and the virus, this is a common problem of all mankind, and together we will win," Johnson said.

It is reported that the UK is ready to invest about 388 million pounds to fight the COVID-2019 virus. This money will have to go to purchase and conduct tests, as well as to develop a vaccine. A so-called donor conference will be held today to raise about 7.5 billion euros to provide every corner of the world with a vaccine that will be sold at affordable and fair prices. At least, this is what the head of the European Commission, Ursula von der Leyen, said. The conference will be attended by the Melinda and Bill Gates Foundation, WHO, and various other charitable foundations and organizations. The event is also supported by the top officials of Germany, France, and Italy - Angela Merkel, Emmanuel Macron, and Giuseppe Conte.

On the second trading day of the week, only one macroeconomic report is planned in the UK – business activity in the service sector, which has a "smart" forecast of 12.3. Similar indicators will be released in the afternoon in the United States. We believe that all these three reports will be ignored by traders, as these figures are not particularly important for the UK economy or the US economy at the moment. An absolutely true proposition that the "coronavirus" will not be able to win any business activity or economic activity will not grow. Therefore, the goals of the health sector are now in the first place. And these goals are the same for the whole world. All the most interesting things for the British pound are planned for the second half of the week. That is when the Bank of England will hold a meeting, after summing up the results of which traders will be able to draw new conclusions. In the meantime, the situation in the currency market remains calm, and participants are more interested in the general fundamental background, which does not have a special impact on the market.

The technical picture, as we have said many times before, remains the most important for analyzing and predicting the movement of the pound/dollar currency pair. On Monday, the pair's quotes were fixed below the moving average line, so the trend is now changed to a downward one. If we do not take into account the quarantine, the crisis, and the epidemic, we would say that the upward trend that began on March 20 is over. This is evidenced by a fairly large number of technical factors, the most important of which is the rebound from the Murray level of "7/8"-1.2634 twice. However, after the end of one trend, we often wait for the beginning of another. At this time, the downward trend may not start. On the weekend for the euro/dollar pair, we assumed that the quotes still began to consolidate, but not in a narrow channel, but in a fairly wide one (about 250 points). Approximately the same pattern can be observed for GBP/USD in the coming weeks, and the side channel is already clearly visible. It can be limited by the level of 1.2637 from above and by the area of 1.2207-1.2265 from below. Thus, its width will be about 400 points, but in the future, the channel may narrow. The main reason for the possible absence of a trend in the near future is the lack of support for one of the currencies by the macroeconomic or fundamental background, as well as the lack of panic in the market when both backgrounds do not matter at all. Therefore, we cannot now conclude that the US dollar or, conversely, the pound will become more expensive. The lower channel of linear regression has turned sideways, which already indicates that there is no trend in the medium term. In general, we would recommend that traders do not expect strong growth of any currency in the near future.

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The average volatility of the GBP/USD pair has started to decline again and is currently 125 points. For the pound, this is not too much. The main thing is not to start a new trend of increasing volatility, which may mean a new panic in the market. On Tuesday, May 5, we expect movement inside the channel, limited by the levels of 1.2315 and 1.2565. A reversal of the Heiken Ashi indicator upward will indicate a round of an already ascending correction.

Nearest support levels:

S1 – 1.2390

S2 – 1.2329

S3 – 1.2268

Nearest resistance levels:

R1 – 1.2451

R2 – 1.2512

R3 – 1.2573

Trading recommendations:

The GBP/USD pair continues to move down on the 4-hour timeframe. Thus, traders are now recommended to sell the pound with the goals of 1.2390 and 1.2329 and keep the shorts open until the Heiken Ashi indicator turns upward. It is recommended to buy the pound/dollar pair again not earlier than the reverse price fixing above the moving average with the first goals of 1.2512 and 1.2565.

Explanation of the illustrations:

The highest linear regression channel is the blue unidirectional lines.

The lowest linear regression channel is the purple unidirectional lines.

CCI - blue line in the indicator window.

Moving average (20; smoothed) - blue line on the price chart.

Murray levels - multi-colored horizontal stripes.

Heiken Ashi is an indicator that colors bars in blue or purple.

Possible variants of the price movement:

Red and green arrows.

The material has been provided by InstaForex Company - www.instaforex.com