4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - downward.
Moving average (20; smoothed) - sideways.
CCI: 66.3400
The pound sterling at the auction on Wednesday, March 18, was traded again synchronously with the euro/dollar pair. And together, they have been trading mostly sideways for more than a week. At the same time, the current movement can not be called a classic flat. Rather, it is a movement in a wide lateral channel. Yesterday, for example, the quotes of the pound/dollar pair once again rebounded from the 40th level. Previously, they had already done this at least four times. Thus, the fall in the British pound was provoked on Thursday by a technical rebound from the level of 1.4000, the unfair reaction of traders to the Fed meeting, and a new increase in the yield of US government bonds. But the meeting of the Bank of England did not affect the movement of the pair. Thus, such serious fundamental factors had an impact on traders, however, it is not enough to bring the pair out of an incomprehensible movement. In the coming days, the quotes may fall to 1.3824, near which the lower line of the expected side channel is located. In the long term, we continue to believe that the British currency will continue to strengthen. We have repeatedly said that the markets completely ignore all the negative factors from the UK. But it is unlikely that they will be able to ignore the macroeconomic laws. Since the money supply in the United States will soon become $ 2 trillion more, this may provoke a fall in the exchange rate of the US currency. We add here also the speculative factor and we get that the "bitcoin-like" pound sterling can continue to grow, despite a whole bunch of fundamental factors that should have lowered it back to 1.3000 a long time ago.
But back to the Bank of England meeting and its results. In principle, there is not much to list here. The British regulator left the base rate unchanged at 0.1%, and also maintained the current volume of government bond repurchases for 895 billion pounds. Just like the Fed, the Bank of England is not going to tighten monetary policy until it sees stable growth in the British economy and stable inflation above 2%. The Bank of England also indirectly hinted at a possible reduction in the key rate in 2021: "If the inflation forecast worsens, the regulator is ready to take any necessary measures." In an accompanying statement, the Bank of England also said that the prospects for economic recovery at the moment remain uncertain. Earlier, Andrew Bailey predicted a 4% drop in GDP in the first quarter. "The outlook for the British economy continues to depend on the pace of vaccination, the pandemic situation, and the response of markets and households to all of these developments". Meanwhile, we also note a high rate of vaccination growth, which may lead to an increase in retail sales in the second quarter. The Bank of England expects a reduction in the forecast of the unemployment rate compared to February, thanks to the approval of the program of support for business and the population, presented by the Minister of Finance Rishi Sunak. The Bank of England expects a sharp jump in inflation to 2%, as the base values of the indicator (for 2020, which is being compared) were quite low.
Meanwhile, the UK is facing its local vaccine shortage in the near future. Although the British government has placed an order for a total of 400 million doses of vaccines (with a population of 66 million), this means little, since the question here is how much the pharmaceutical companies will be able to fulfill the orders. Earlier, we talked about the vaccination crisis in the European Union, which just faced a failure to meet the supply plan by about 75% (if we talk about AstraZeneca). The UK's National Health Service has warned local health organizations that much fewer vaccines will be available next month and asked that organizations focus on vaccinating those populations that are most vulnerable. However, Health Minister Matt Hancock does not see anything terrible in reducing the rate of vaccination, as, according to him, the UK is already ahead of schedule. He confirmed that the authorities intend to vaccinate every adult resident of the country by the end of July. It is reported that at the moment in the UK, 25 million citizens have received the first dose of vaccination, both doses – 1.7 million Britons.
What is the result? Vaccination remains one of the few pluses that can now be singled out for the UK and the pound. But the pound itself continues to feel just fine. Recall that the British currency continues to trade just 340 points from 2.5-year highs. Thus, the bulls only need to gather their strength and overcome the psychological level of 1.4000, with which they have been having serious problems recently. In turn, the bears will feel strength below the level of 1.3800, below which they also cannot gain a foothold in recent weeks. We now have a "tug of war" without a clear winner.
The average volatility of the GBP/USD pair is currently 113 points per day. For the pound/dollar pair, this value is "high". On Friday, March 19, therefore, we expect movement within the channel, limited by the levels of 1.3829 and 1.4055. The reversal of the Heiken Ashi indicator back to the top can signal a new round of upward movement.
Nearest support levels:
S1 – 1.3916
S2 – 1.3885
S3 – 1.3855
Nearest resistance levels:
R1 – 1.3947
R2 – 1.3977
R3 – 1.4008
Trading recommendations:
The GBP/USD pair has started a new round of downward movement on the 4-hour timeframe. Thus, today it is recommended to open buy orders with targets of 1.3977 and 1.4008 if the price bounces off the moving average line. It is recommended to consider sell orders again with the targets of 1.3855 and 1.3829 if the price is fixed below the moving average.
The material has been provided by InstaForex Company - www.instaforex.com