24-hour timeframe
The British pound paired with the US currency moved almost identically to the euro/dollar pair last week. In fact, we are seeing much the same thing. Volatility falls, the activity of traders falls, the pair is caught between two lines going towards each other, which just shows the transition from a strong trend to quiet trading, or maybe even to a flat. All indicators on the 24-hour timeframe are now in the transition stage from a high-volatility movement to a calm one. We can see that the Bollinger bands indicator has been narrowing in recent weeks and still the distance between its upper and lower bands remains quite large. The Ichimoku indicator also has a huge distance between its lines. And most importantly, the highly volatile movement has ended, which means that the lines of the Ichimoku indicator also need to get closer to each other, which has not yet happened. Thus, we recommend conducting technical analysis on a 4-hour timeframe, without paying attention to the daily one.
In fundamental terms, everything was extremely simple for the British pound this week. We have already discussed the key macroeconomic statistics from overseas in the article on EUR/USD, and no reports were published in the UK this week. Thus, even theo6retically, traders had nothing to react to this week. In addition to the report on applications for unemployment benefits in the United States. However, the pound/dollar pair showed approximately the same direction of movement as the EUR/USD pair. The key topic of this week, in our view, was the resumption of negotiations between the British and European delegations, led by David Frost and Michel Barnier. According to the parties, the work on an agreement that will determine further relations between the European Union and the UK after Brexit is completed is ongoing. But since the "coronavirus" epidemic is raging throughout Europe, face-to-face meetings cannot be held now. Accordingly, the parties decided to hold three more rounds of negotiations in video mode before July 1, each of which will take a week. According to experts, these negotiations will be much more effective than face-to-face meetings. And given the fact that only 2.5 months remain until July 1 (when the parties must officially declare their decision to extend or not extend the "transition period"), there is very little chance of reaching any agreements in principle. Not to mention a full-fledged agreement. Moreover, Boris Johnson is on sick leave, and it is the Prime Minister who is leading the negotiation process and it is the Prime Minister who is categorically opposed to postponing the completion of the "transition period". So now the intrigue is, will London go for a one-or two-year transfer?
Meanwhile, the UK intends to review relations with China after the problem of the epidemic is resolved. This was stated by the acting Prime Minister of Great Britain Dominic Raab. Mr. Raab said that the relationship will not be the same and it will change for the worse. "After Britain has already lost more than 10,000 of its citizens, it is not possible to conduct normal business with China," Raab said. The British politician believes that China has accumulated a lot of questions about the "coronavirus" pandemic. "We will have to ask difficult questions about how this happened and how it could have been stopped earlier," Raab says. Earlier, similar rhetoric was voiced by the United States and France. French President Emmanuel Macron also said that there are "too many grey spots" in the history of the coronavirus. "Let's not naively assume that China has handled the epidemic much better than we have. We don't know for sure. Obviously, we don't know the whole picture," the French President said in an interview. Donald Trump has long accused Beijing of hiding the real facts about the epidemic, its real scale. This is what prevented the entire world from making correct and timely decisions regarding quarantine, which led to a worldwide infection (neither, of course, is the unprofessionalism of WHO). China, of course, rejected all the accusations. And we can only guess what really happened in China at the end of last year. And at the same time wonder why in China, with its one and a half billion people, the virus was able to be curbed the fastest? Is it because Beijing actually applied "draconian" quarantine measures, because China initially knew about the virus and was prepared for it before it spread, or because official figures are false?
At the same time, Dominic Raab said that the quarantine in the country is being extended for at least three more weeks, as another scenario threatens to increase morbidity and mortality. "Now there is light at the end of the tunnel, but we are at a critical stage in the development of the pandemic. Easing the quarantine measures too early may negate all progress in curbing the epidemic and all the sacrifices will be in vain. As a result, we will have to introduce a new quarantine due to a new surge in morbidity and mortality," said Dominic Raab. The politician also said that 5 conditions will be met at once in order for the quarantine in the Foggy Albion to begin to weaken. First, the national health system must fully cope with the number of incoming patients. Second, scientific research should show that the epidemic has become manageable. Third, the daily mortality rate should be reduced. Fourth, the entire population of the country should be provided with tests for "coronavirus" and means of protection. Fifth, there should be no risk of a repeat surge.
Thus, there were also no optimistic reports from the UK last week. So far, in general, the British currency continues to grow in price, but on the 4-hour chart, there has already been a change in the downward trend. At this time, we believe that neither the British pound nor the US currency has an advantage. However, everything will depend on the market itself. We recommend that traders, as before, pay close attention to the technical picture, since the mood and behavior of most traders can not be predicted now – there is no reaction to the foundation and macroeconomics now.
Trading recommendations:
On the 24-hour timeframe, the pound/dollar pair is trying to start a new downward movement. However, the more accurate picture is now on the 4-hour timeframe, which we recommend considering first. Turning the MACD indicator down on the current timeframe will confirm the intention of traders to start a new round of purchases of the US dollar.
The material has been provided by InstaForex Company - www.instaforex.com