Overview of the GBP/USD pair. January 5. Boris Johnson is preparing to tighten the quarantine again.

4-hour timeframe

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Technical details:

Higher linear regression channel: direction - upward.

Lower linear regression channel: direction - upward.

Moving average (20; smoothed) - sideways.

CCI: -5.8046

The British pound on the first trading day of the new year fell as well as the euro on the last day of the old one. However, in general, both pairs maintain an upward mood. Both pairs continue to be located above the moving average line. Therefore, despite the small corrections that occur from time to time, both the euro and the pound continue to rise in price in general. However, the pound/dollar pair continues to trade in the "high-volatility swing" mode. Thus, new price-fixing below the moving average, and then no less rapid upward rises, are not excluded at all. The pound/dollar pair now needs to be traded very carefully. If a stable upward trend remains for the euro currency, then the pound's trend is unstable. It seems that the markets continue to be nervous, although there is nothing to be nervous about. Brexit is finally completed and left behind, a trade deal with the EU is signed. For the UK, 2020 did not end as badly as it could have.

However, as we have repeatedly said throughout 2020, there are still many potential problems for the UK. One of these problems is Scotland, which regularly continues to declare its intention to leave the United Kingdom and return to the European Union. The First Minister of Scotland, Nicola Sturgeon, intends to go to the very end on this issue and has already promised that if her party wins the next parliamentary elections, it will continue to apply to London to obtain legal permission to hold a new independence referendum. However, Boris Johnson has repeatedly stated that Edinburgh will not get such a right. Earlier, the British Prime Minister said that such events can not occur more often than once in a hundred years. The other day, Boris Johnson said that the distance of 41 years (the time distance between the referendums of 1975 and 2016) is "good". That is, until 2055, Scotland will not be permitted to hold a new referendum. However, Nicola Stegen has repeatedly "mildly" threatened London, saying that if the government goes against the democratic choice of the people, then this power will sooner or later be swept away. Recently, Sturgeon also cited the example of Donald Trump, who for a very long time, in her opinion, ignored democracy and eventually lost the election. Thus, the UK, which has just emerged from one epic (Brexit), can immediately dive headlong into the next one called "Scexit". The question is, what will this confrontation be like? Will Sturgeon, the First Minister of Scotland, give up her position if London continues to reject her requests, or will she go for an open conflict and an illegal referendum? In general, for Britain, 2021 may be no less interesting and important than the previous four.

Also, do not forget about all the economic problems of Foggy Albion. We will not once again list the entire list, it is enough to note that in the fourth quarter, Britain's GDP is likely to lose a few percent. That is, at a time when the European and American economies continue to recover from the "coronavirus crisis", the British one will begin to shrink again. In the first quarter of 2021, GDP may also shrink, even the Bank of England said. The problem is that Brexit, even with a deal, will still hit the British economy. The services sector, which in the UK accounts for a very significant share of GDP, will suffer very much from a break with the EU. Especially given the fact that the agreement has almost no points that would regulate relations between the EU and the UK in the service sector. Next, don't forget that Britain went through several "tough" quarantines this winter. The first was in November, then Boris Johnson again extended and tightened quarantine measures several times, and at this time, due to a new strain of "coronavirus", Johnson is preparing to close schools. We have not paid attention to the data on the number of new cases of "coronavirus" for a long time, since at the end of last year several vaccines were created at once, it was announced that vaccination would begin in the near future, and the whole world calmed down a little on this issue. But in reality, vaccination is vaccination, and in Britain in recent days, 55 thousand new cases of infection have been recorded. These are record numbers. Consequently, the "hard" quarantine can continue to persist and continue to "hit" the British economy. It is worth noting that everything is bad overseas. On January 2, 297 thousand Americans were infected in the United States. Also an absolute anti-record. However, in America, it has long been decided that they will not tighten the quarantine. Therefore, there is no nationwide "lockdown" or "hard" quarantine. Thus, the US economy will continue to recover, unlike the British one.

However, all these facts and factors continue to be ignored by market participants, who generally continue to get rid of the US dollar. Thus, it is generally recommended to trade for an increase, however, it should be remembered that the pair very often and sharply changes the direction of movement and continues to move in the "swing" mode.

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The average volatility of the GBP/USD pair is currently 121 points per day. For the pound/dollar pair, this value is "high". On Tuesday, January 5, thus, we expect movement inside the channel, limited by the levels of 1.3429 and 1.3671. The reversal of the Heiken Ashi indicator to the top signals a new round of upward movement within the "swing".

Nearest support levels:

S1 – 1.3550

S2 – 1.3489

S3 – 1.3428

Nearest resistance levels:

R1 – 1.3611

R2 – 1.3672

R3 – 1.3733

Trading recommendations:

The GBP/USD pair on the 4-hour timeframe is now in a new round of corrective movement. Thus, today it is recommended to trade for an increase with the targets of 1.3672 and 1.3733 if the pair bounces off the moving average. It is recommended to trade the pair down again with targets of 1.3489 and 1.3428 if the price is fixed below the moving average line. In general, the "swing" continues now. Not a good time to trade.

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