In today's review of the GBP/USD currency pair, we will summarize the results of January trading and the past week, as well as outline the near and possibly medium-term prospects for this very interesting and much-loved currency pair. However, let's start with a description of the external background and the clouds that are gathering over the Foggy Albion.
I will start with the so-called "Vaccine War" against the COVID-19 pandemic. Let me remind you that in the UK, one of the most difficult situations with the spread of coronavirus infection, in which the number of infected and dead from the insidious epidemic is steadily growing and beats the previous anti-records. It is no secret that the authorities of many European countries are closing their borders to avoid new strains of the infection entering their territory, namely the British strain and the South African one. Because of the tighter borders, the supply of the vaccine to Northern Ireland, which is known to be part of the United Kingdom of Great Britain, was threatened. However, Brussels officials decided to refrain from blocking the delivery of the vaccine to this part of the UK for the time being. There are all sorts of auctions, where it is proposed to make certain concessions, in this case to London.
A difficult situation continues to persist between England and Scotland. The problems and disagreements have not gone away. We all know and remember that Scotland was not eager to leave the European Union and even threatened London to hold its referendum on this issue, as well as a referendum on its independence. Recently, the contradictions between London and Edinburgh have escalated, as have other events in different parts of the world. In the United States, its problems are the split of society after the presidential election.
Against this background, the elderly Biden is clearly in a restless state and is trying to increase security as much as possible. There is even talk that the US Congress building may be surrounded by a wall, about the same as the construction of which on the border with Mexico, Joe Biden canceled in one of his first decrees as US president. A paradox, that's all. In such a turbulent situation that is observed in the world, it would be quite logical to transfer assets to safe havens, one of which is the US dollar. On the example of the pound/dollar pair, let's see what is happening.
Monthly
So, at the end of the first month of the new year, the GBP/USD currency pair strengthened. We see that back in December 2020, the pair confidently entered the limits of the Ichimoku indicator cloud and then closed trading at 1.3657. The January session of the current year ended at a significant mark of 1.3700, which was repeatedly noted in many previous articles on this currency pair. At the same time, during the January trading, the GBP/USD quotes fell as much as 1.3450, however, this very strong technical level perfectly coped with its support function and returned the pair to an upward trend. The January highs were shown at 1.3757, naturally, to continue growing, they need to be updated, after which the GBP/USD pair has every chance to rise to the black 89 exponential moving average, which on the monthly chart is at 1.3825. To be honest, the January candle with a very small bullish body and an unintelligible closing price relative to the level of 1.3700 does not cause much enthusiasm, so it is not worth making any unambiguous conclusions on the oldest timeframe.
Weekly
At the end of the last five days, the pound/dollar pair strengthened by 0.20%. The candle that appeared for January 25-29 is very similar to the January candle. This means that the further direction of the pair can occur in both the north and south directions. I think that much will depend on the external background and especially on technical factors, namely, the ability of the bulls for the pound to confidently overcome the very difficult mark of 1.3700 and consolidate trading for GBP/USD above this strong and extremely significant level. I wonder what decision the market participants will make? The fact is that both the January candle and the last weekly candle can be perceived as a reversal model of the "Hanged" or "Hanged" candle analysis.
At the same time, the white color of the body of both candlesticks does not matter much, in contrast to their shape and the fact that they are at the very peak of the market, and even at such a landmark level as 1.3700. I would venture to assume that a confident close of weekly trading not only above 1.3700 but also above the sellers' resistance of 1.3757, will indicate bullish sentiment for the pair and send it to the price zone of 1.3800-1.3825. If the market for GBP/USD is under the control of the bears and they manage a true breakdown of the strong technical level and support of 1.3450, then the "British" is likely to expect a subsequent decline. At the same time, I recommend paying attention to the fact that the red line of the Ichimoku Tenkan indicator passes right near the support of 1.3450, which is quite capable of strengthening this support. I do not exclude the possibility that for some time the pair will be trading in a not so small range, which is 1.3750-1.3450. In this case, medium-term forecasts for this instrument can be made only after leaving the designated range in one of the parties.
In the meantime, we need to consider both positioning options. I recommend trying the next purchases near the mark of 1.3660, and selling after the growth in the area of 1.3700-1.3750, the appearance of bearish candle signals on lower time frames, which we will analyze in detail in tomorrow's article on this currency pair.
The material has been provided by InstaForex Company - www.instaforex.com