4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - upward.
CCI: -147.2259
The British pound spent the last two days of the last trading week again in an upward movement and returned to its 2.5-year highs. Thus, a new downward trend once again failed. At the same time, it can not be said that the Bank of England is to blame for the fact that it returned the demand for the British currency. No, on the contrary, the Bank of England was quite contradictory and ambiguous in its comments. It was the markets that interpreted all the information received in favor of the pound. So it was the markets that wanted to find a reason to start buying the dollar again and found it. On Friday, they found a reason in the form of weak non-farms in the United States, and as a result, the upward movement continued all Friday. What's next? For the pound/dollar pair, frank swings remain. The price constantly jumps up and down and is not able to overcome the local maximum or to start a downward trend. Thus, we conclude that the bears are now extremely weak, and the bulls do not have enough strength to push the British pound further up. There was a stalemate. It seems that everything will depend on whether buyers will start taking profits on long positions in the near future. If so, the pound may start a long-awaited tangible downward movement, which even risks becoming a collapse, since there is no particular reason for the pound to continue to be so high and could not even adjust normally.
Meanwhile, Democrats have very gracefully sidestepped any resistance from Republicans to enact a new $ 1.9 trillion stimulus package. Representatives of the Democratic Party reasonably decided to adopt a budget resolution that allows them to decide on a package of incentives by a simple majority in the lower and upper houses of Congress. Recall that previously, the approval of the stimulus package required the support of at least 60 senators, but there are only 50 Democrats in the Senate, and Republicans would not vote on the package with its current size of almost $ 2 trillion. The Republicans continue the war that began during the time of Donald Trump, and continue to delay the allocation of aid to the American economy. Their last offer was $ 600 billion in aid. It is clear that with such disagreements, negotiations will take several more months. However, the budget resolution allows a decision on this issue to be made by a simple majority. In the lower house of Congress, the decision has already been approved (where the majority is in the hands of the Democrats). In the upper house, the forces are distributed in a 50/50 ratio, but if the vote is equal, Kamala Harris, the Vice President of the United States and also a Democrat, will have the decisive vote. Thus, the defeat of Donald Trump and the Republicans in the elections has led to the fact that all power in the country is now concentrated in the hands of the Democrats. At least for two years until the next parliamentary elections. The budget resolution was passed with the vote of Kamala Harris, because all 50 Republican senators were expected to vote against it. Speaker Nancy Pelosi immediately said that the stimulus package could be passed before March 15, when the "coronavirus" unemployment benefits expire. The President of the United States himself said: "If I have to choose between helping Americans who are suffering so much right now and getting bogged down in lengthy negotiations with the Republicans, it will be an easy choice. I'm going to help the American people who are having a hard time right now." According to Biden, the report on Nonfarm Payrolls, which was published on Friday, underlines the need for urgent measures to save the US economy. At the same time, one of the Republican senators, Michael Burgess, said that Congress should at least wait for the adoption of the stimulus package until all the previous packages are fully spent. According to Burgess, there is still about $ 1 trillion left unspent. Thus, if the "Biden package" is still adopted, then in 2021, another $ 3 trillion will be poured into the US economy. It turns out the same amount as in 2020. Therefore, the US dollar may sink by this year not by 5-6 cents, as we assumed earlier, but by all 10 cents, if not more. However, as we said earlier, this is only in the hands of the United States.
As for the prospects of the British pound, there is no point in even trying to make a forecast for more than 1 day. The pair continues to "swing", respectively, the trend changes every couple of days. Formally, the pound may even continue to rise in price in 2021, if the US economy really will be poured 3 trillion dollars. However, we are still concerned about the fact that traders cannot even form a normal correction. The technical picture looks ambiguous, the macroeconomic background is ignored, the fundamental background is ambiguous, the COT report indicates a constant change in the mood of professional traders. Thus, we believe that in the current conditions, it is best to trade on the lower timeframes, on the hourly and below. In the new week in the UK, a new speech by the Chairman of the Bank of England, Andrew Bailey, will be held, which can again be interpreted by the markets as a signal to buy the British currency. The level of 1.3745, from which the price has already bounced 5 times, remains insurmountable. At the same time, even overcoming this level does not guarantee further growth of even 100 points. This was already the case with the level of 1.3700, from which the price also bounced five times, as a result, after overcoming it, it went up another "whole" 50 points. Thus, it is best to look for short-term trends on lower timeframes and try to trade the pair there.
The average volatility of the GBP/USD pair is currently 95 points per day. For the pound/dollar pair, this value is "average". On Monday, February 8, thus, we expect movement within the channel, limited by the levels of 1.3636 and 1.3826. The reversal of the Heiken Ashi indicator downwards signals a new round of downward movement within the framework of the continuing "swing".
Nearest support levels:
S1 – 1.3702
S2 – 1.3672
S3 – 1.3641
Nearest resistance levels:
R1 – 1.3733
R2 – 1.3763
R3 – 1.3794
Trading recommendations:
The GBP/USD pair on the 4-hour timeframe is in a new round of upward movement within the framework of the continuing "swing". Thus, today it is recommended to trade for an increase with the targets of 1.3794 and 1.3824 if the price is fixed above the Murray level of "7/8"-1.3763. It is recommended to consider sell orders with a target of 1.3641 if the price bounces from the level of 1.3733 (1.3745).
The material has been provided by InstaForex Company - www.instaforex.com