4-hour timeframe
Amplitude of the last 5 days (high-low): 83p - 179p - 135p - 106p - 118p.
Average volatility over the past 5 days: 130p (high).
The British pound continues to trade quite actively on the third trading day of the week, although the trend movement is completely absent today. If the euro continues to show a downward movement, then the pound for some reason has stalled in one place today and is currently in standby mode. There were no important macroeconomic publications in the UK today, and macroeconomic statistics from across the ocean should have caused a new rise in the price of the US currency. Should have, but did not. Such a reaction of market participants, or rather the lack thereof, raises certain questions. Why did the pound suddenly stop for no reason? Usually, such behavior of traders is observed before some important events, the outcome of which is very difficult to predict. But at the moment, nothing of the kind looms on the horizon. Macroeconomic statistics are published, and the trend continued for the pair even during the Christmas and New Year holidays. Thus, we believe that such a behavior is an accident, nevertheless, we pay attention to the narrowed Bollinger bands (oriented sideways), as well as the location of the price inside the Ichimoku cloud. These factors do not contribute to active trading at this time.
While traders, analysts and experts from various fields continue to speculate on the prospects of the British economy after January 31, as well as after December 31, 2020, we continue to receive reports that British business continues to incur losses. Car production fell 17% last month, with many factories halting due to Brexit uncertainty. It is reported that since October 2019, car production has been deliberately reduced by manufacturers amid fears due to a complete break in ties established with the European Union for the supply of components and the further sale of products. According to the Automobile Manufacturers Association, production volumes in the machine-building industry have declined in the past 17 months. The entire engineering industry is very dependent on European sales markets, since about 55% of all production goes specifically to the European Union. If Britain is unable to conclude a trade agreement with the EU, which will be at least slightly worse than the current terms of trade with the EU countries, this will be a disaster for the UK automotive industry. However, not only this industry is facing serious problems. As we have repeatedly written, the entire economy of the United Kingdom will feel the charm of life outside the European Union. And the whole economy consists of individual industries, one of which is the state of things inside which we have highlighted today.
Meanwhile, the speech of the head of the Bank of England Mark Carney will be held tomorrow, who can dot all the "and". We have been waiting for several months when the British regulator decides to lower the key rate, since such a decision would be completely justified from the point of view of macroeconomic statistics from the UK in recent months. However, Mark Carney is not alone in deciding to change the key rate. At least seven members of the monetary committee continue to oppose. Mark Carney himself, in his last interview, said that the main central banks had at their disposal an extremely small number of tools to combat the economic downturn. Carney warned that the world economy is moving toward a "liquidity trap" and a further weakening of monetary policy will no longer be able to stimulate additional costs. Carney also believes that it is the governments of countries experiencing economic problems that should take responsibility and consider ways to reduce taxes and government spending to solve these problems.
From a technical point of view, the pound/dollar is now in some kind of flat. An attempt to overcome the lower boundary of the Ichimoku cloud - the Senkou Span B line - was unsuccessful, so further movement down is still being canceled. Given the clearly lateral direction of movement, a flat may be observed in the coming days with a decrease in volatility to 50-60 points per day. It is recommended to resume downward trading in case of overcoming the Senkou Span B. line
Trading recommendations:
The GBP/USD pair, it can be said, is currently being adjusted. Thus, traders are advised to wait until the price consolidates below the Senkou Span B line and resume trading downward with the goal of the support level of 1.2993 (which coincides with the lower boundary of the volatility channel on January 8). It is recommended that purchases of British currency be returned no earlier than when the price is consolidated above the Kijun-sen line with the first target at 1.3224, and under current conditions we also recommend waiting for the Bollinger bands to expand upward.
Explanation of the illustration:
Ichimoku indicator:
Tenkan-sen is the red line.
Kijun-sen is the blue line.
Senkou Span A - light brown dotted line.
Senkou Span B - light purple dashed line.
Chikou Span - green line.
Bollinger Bands Indicator:
3 yellow lines.
MACD indicator:
Red line and bar graph with white bars in the indicators window.
Support / Resistance Classic Levels:
Red and gray dotted lines with price symbols.
Pivot Level:
Yellow solid line.
Volatility Support / Resistance Levels:
Gray dotted lines without price designations.
Possible price movement options:
Red and green arrows.
The material has been provided by InstaForex Company - www.instaforex.com