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Overview of the GBP/USD pair. May 26. Mike Pompeo demands compensation from China for the "coronavirus". China accuses Washington

4-hour timeframe


Technical details:

Higher linear regression channel: direction - downward.

Lower linear regression channel: direction - downward.

Moving average (20; smoothed) - sideways.

CCI: -57.1704

The British pound spent the first trading day of the new week in calm and quiet trading. After the bulls made an unsuccessful attempt to start a new upward trend, the pair's quotes returned to the area below the moving average line, so the trend has now changed back to a downward trend. On Monday, May 25, the pair began to adjust against the new trend, but this correction is very difficult to call a strong or weak correction or even a correction at all. The volatility of the day is less than 50 points, which is a kind of anti-record for the pound/dollar pair. Thus, we still assume that the formation of a downward trend will continue, since almost all technical indicators speak in favor of this. Both linear regression channels are directed downward, the pair is below the moving average, and the Ichimoku indicator has formed a "dead cross". The overall fundamental background for the British currency remains completely negative, and last Friday it was supported by the macroeconomic background. The UK retail sales report for April showed a 23% year-on-year decline. And yes, the situation in the United States is no better, just remember the unemployment reports overseas. However, it is the UK that is now facing a "double" crisis, as in addition to the crisis caused by the pandemic, its economy has been suffering from a "divorce" from the European Union for more than three years.

There were no important publications in the UK or the United States on Monday. Exactly the same number of them will be today, on Tuesday, May 26. In such conditions, the volatility of the GBP/USD pair may remain low, but at the same time, we remind you that traders are now paying much more attention to technical factors and the overall fundamental background, rather than regular reports. Little news and important information have been received from the UK recently. We remember the time when every day the Parliament received news on Brexit, on the vote on the "deal" with the European Union, on the opposition of the Democrats and Conservatives, on the activities of Theresa May, and then Boris Johnson. Now - news calm. But from across the ocean, the news flows "like a bucket". Most of it has already been covered, most of it has a certain cyclical nature since Donald Trump has clearly formed a list of the most exciting topics in recent months and comments on them almost every day as if reading a mantra. However, yesterday, Trump also made a statement that has never been heard from his lips in recent months. The US leader said that Vladimir Putin probably does not want him to remain President for a second term. Trump said that "he is the worst thing that has happened to Russia", but he "got along with the Russian President". Thus, according to Trump, who has recently been complaining more and more often, China and Russia do not want his re-election, although, after the 2016 election, Trump was accused of having ties with Russia, which could have influenced the election. No evidence has been found, and just like in the case of the Chinese pandemic, we will never know the truth.

By the way, not only Donald Trump in the White House believes that China is to blame for the "coronavirus" epidemic. To be fair, other politicians have the same opinion. However, among these politicians, it is difficult to find at least one member of the Democratic Party, which probably chose the path of cooperation with China and not the other way around. US Presidential National Security Advisor Robert O'Brien compared China's actions or inaction on the coronavirus issue with the actions of the Soviet government in the 1986 accident at the Chernobyl nuclear power plant. According to O'Brien, Beijing knew from the very beginning what was happening with the virus that appeared in Wuhan, but lied to WHO and did not allow experts from other countries to access the information. "They released a virus that destroyed trillions of dollars of American economic welfare that we have to spend to keep our economy going, to keep the American population afloat during this epidemic," O'Brien said.

The head of the US State Department, Mike Pompeo, echoes him. "First we need to deal with the epidemic. The second stage is that we need to inform the whole world that the Chinese Communist Party still does not provide us with information," Pompeo said at a regular briefing. "The world should come together to make China pay its bills until it changes its behavior and behaves like a decent country," Pompeo added. "Then, when the first two stages are completed, the US President will decide how best to get China to admit its mistakes and realize the consequences of its actions and agree to pay compensation for those in the US affected by the virus." According to Pompeo, compensation should be given not only to those Americans who fell ill or lost a loved one but also to those who suffered financial damage.

At the same time, Chinese Foreign Minister Wang Yi said that "some political forces in America are holding Sino-American relations hostage, trying to push them to a new cold war." "This is dangerous and will endanger world peace," Wang Yi said.

The US currency does not react to all this news yet and continues to grow steadily in price in a pair with the British pound. We believe that in the future of several months, the quotes may fall to absolute lows over the past decades around $1.14. And a lot will depend on what happens just in the Foggy Albion. But the questions remain the same. Will Boris Johnson be able to negotiate with Brussels (unlikely) and, if not, how is he going to pull the British economy "from the other world", where it may end up at the end of the "coronavirus" crisis and after a complete break in ties with the European Union? The future of the British pound and the UK economy depends on the answers to these questions. According to some experts, London deliberately does not make contact with the group of Michel Barnier and is not going to concede, and therefore is not eager to sign a comprehensive agreement. Thus, the second issue is increasingly on the agenda.


The average volatility of the GBP/USD pair has been steadily decreasing in recent days and is currently only 66 points. On Tuesday, May 26, thus, we expect movement within the channel, limited by the levels of 1.2125 and 1.2257. A reversal of the Heiken Ashi indicator downwards will indicate a possible resumption of the downward trend. Fixing the price above the moving average will indicate the weakness of the bears.

Nearest support levels:

S1 – 1.2146

S2 – 1.2085

S3 – 1.2024

Nearest resistance levels:

R1 – 1.2207

R2 – 1.2268

R3 – 1.2329

Trading recommendations:

The GBP/USD pair was fixed below the moving average on the 4-hour timeframe, so the trend changed to a downward one. Thus, it is now recommended to trade the pound/dollar pair for a decrease with the goals of 1.2146 and 1.2085, but after the reversal of the Heiken Ashi indicator down. It is recommended to buy the pound/dollar pair if traders manage to return to the area above the moving average, with goals of 1.2257 and 1.2329.

The material has been provided by InstaForex Company -