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Overview of the GBP/USD pair. August 18. Scotland and Northern Ireland are increasingly hinting at their exit from the UK.

4-hour timeframe

Technical details:

Higher linear regression channel: direction - upward.

Lower linear regression channel: direction - upward.

Moving average (20; smoothed) - sideways.

CCI: 100.3660

If the European currency is even in a side channel, then at least it is traded between its upper and lower borders, regularly working them out, then the pound sterling is traded in different directions even within the day. All its movements are similar to confusion and chaos, but in no way to calm trading, even in the flat. At the moment, the pound/dollar pair is fixed above the moving average line, but the last three attempts to overcome the Murray level of "6/8" - 1.3123 ended in failures. But the Murray level of "6/8" is not even the upper limit of the side channel, in which the pair has been trading for a month and a half. Thus, it is now completely unclear what market participants think at all, especially the major players who drive all the instruments. And this is especially true for non-profit traders, who are the most important group of large traders. As shown by the latest COT report, this group continues to invest in the British currency, but the size of these investments is not yet enough to continue the upward trend. Moreover, we have repeatedly drawn the attention of traders to the fact that, from a fundamental point of view, the pound sterling does not have such a big advantage over the US dollar (in contrast to the same Euro currency). And given that the pound has already risen in price in a pair with the dollar by 8 cents and there has not been a single significant correction for all this time, the probability of the pair going down, we would say, is now very high. It turns out that market participants have already played back all the negative fundamental background that has been coming from overseas for several months. But it is not possible to constantly sell the dollar for the same reasons. There are no new reasons. As for the British fundamental background, we see a paradoxical situation here. All traders forgot that the economic situation in the Foggy Albion is not much better than in the States. First, of all the European countries, the UK is the country that suffered the most from the first "wave" of the "coronavirus". Second, the British economy has been slowing and shrinking for four years because of Brexit. Third, London has not signed any trade agreements with America, the European Union, or anyone else. Fourth, even negotiations on a trade agreement are not going on with anyone (the EU can no longer be considered, despite the tons of optimism expressed by both sides). Fifth, Boris Johnson is now generally unclear what he is doing, since there is no information about this. The British Prime Minister was due to travel to Brussels in person at the end of July to hold talks with EU leaders. However, it seems that he decided to follow the most famous motto of Donald Trump: "My word, I want - I give it, I want - I take it back."

So what happens? It turns out that the British economy lost 20% in the second quarter, and in 2021 it will be dealt another blow in the form of a complete break of all ties and agreements between British and European companies. The new trade agreement between Britain and the Alliance is already "fantastic". Accordingly, recovery from the "coronavirus crisis" will be long and difficult, complicated by new "kicks". Moreover, Britain may lose Northern Ireland and Scotland in the future. What is happening now in Belarus, what has previously happened in Ukraine and in many other countries before, clearly shows that if people do not like something, they express it from time to time. When the "boiling point" is passed, they will take to the streets and fight for the right to live as they want, and not as they are forced to. This is exactly what can happen in civilised Northern Ireland and Scotland. Edinburgh has long been telling London that it wants to hold a second independence referendum. After this, Prime Minister Nicola Sturgeon is confident of a positive outcome, the country will want to return to the European Union, from which it did not want to leave initially. In Northern Ireland, which has long been in conflict with the British authorities, separatist sentiments and national organizations have always flourished, which, as history shows, can fight for their ideas and beliefs for years. And if the economic situation due to Brexit and the lack of a deal with the EU deteriorates even more in these countries, then a direct confrontation with London may begin. Boris Johnson and Michael Gove just recently visited Scotland and Ireland with financial aid packages for local companies. However, the assistance is provided in the form of loans, not "new year's gifts". But still. Many sources note that London is afraid of losing these two regions. Moreover, the European Union has just recently shown the UK all the advantages of being part of it. "Coronavirus" hurt all European States, but the EU government has accepted an unprecedented package of assistance for 750 billion euros, 2/3 of which will be distributed by grants, that is, free of charge. Moreover, a number of bills aimed at implementing reforms in the fields of energy and finance were adopted, which would hardly be approved by the UK. Thus, it turns out that the EU has become even stronger with the departure of Britain. It should also be recalled once again that it is Britain that is more dependent on the EU, and not vice versa.

Moreover, the Scottish government was much better at dealing with the pandemic itself than the British government, because it made its own decisions and did not follow London's lead. Northern Ireland shows an open desire to rejoin Ireland and does not want to have a border, customs and other bureaucratic issues between them. And the more such disputes and disagreements arise, the more likely it is that the discontent of the inhabitants of these countries will one day "overflow". Then Great Britain will feel for itself what it means when the people are forced to live as they do not want to. The Brexit referendum was devastating from the start. The margin of 3-4% had to be declared insufficient in order to start the procedure of leaving the European Union. 52% were in favor and 48% were against. This means that almost half of the British population is actually forced to leave the EU and live worse than before.

The average volatility of the GBP/USD pair is currently 78 points per day. For the pound/dollar pair, this value is "average". On Tuesday, August 18, thus, we expect movement within the channel, limited by the levels of 1.3032 and 1.3188. A downward turn of the Heiken Ashi indicator will indicate a new round of downward movement inside the side channel of 1.3000-1.3180.

Nearest support levels:

S1 – 1.3092

S2 – 1.3062

S3 – 1.3031

Nearest resistance levels:

R1 – 1.3123

R2 – 1.3153

R3 – 1.3184

Trading recommendations:

The GBP/USD pair on the 4-hour timeframe is located inside the side channel and is currently moving up. Thus, at this time, it is recommended to either trade the pair between the boundaries of the side channel of 1.3000-1.3180 or wait for the end of the flat.

The material has been provided by InstaForex Company -