The British pound continues its steady decline as part of a correction against the upward trend that lasted for a year. The correction is still very weak, and there is no correlation between the euro/dollar and pound/dollar pairs at the moment. Thus, it is now extremely important to understand what factors affect both currency pairs. They are not the same. Based on the fundamental background, we have already said that it does not have any effect on the pairs at the moment. At the very least, it is extremely difficult to explain why the euro currency resumed its growth, while the pound sterling resumed its fall. We have already said that to justify such a development, we need either a positive fundamental background from the European Union or a negative one from the UK. However, the first condition is not met, and the negative fundamental background in the UK has been maintained for 4 years with small interruptions occurring from time to time. And it certainly hasn't changed dramatically in recent weeks. Thus, we conclude that both major currency pairs are now influenced by technical factors to a greater extent. As well as a "global fundamental factor", such as the increase in the US money supply. The "global fundamental factor" is a long-term factor, however, no one has canceled technical corrections. Therefore, it is likely that we are now seeing a banal technical correction for the pound.
Next week will not be the most interesting in terms of macroeconomics. And the macroeconomic statistics themselves are often ignored. We have already said that macroeconomic reports are important in normal (peaceful and non-crisis) times when economies are in a stable state. Then each Nonfarm Payrolls report signals possible changes in this very economy. As well as reports on inflation, industrial production, and others. Now, the state of the economy depends not on Nonfarm Payrolls, but on when and how much money will be poured into it by the government or the central bank, and what other stimulus measures will be taken. Therefore, the statistics have been perceived very coolly by traders for more than a year. In the UK, the GDP figure will be published next week on Tuesday. According to experts' forecasts, by the end of February, the average three-month value of the indicator will decrease by 1.9%-2.0%. GDP for February will lose 8.3%-8.6% in annual terms. Thus, the British economy, which has recently been spoken of in positive terms continues to shrink. Yes, at the end of the 4th quarter of 2020, it managed to grow a little, despite the "lockdown". In the Foggy Albion this winter there were two "lockdowns", with long ones. Before the country began to show high rates of vaccination, it showed the highest rates of morbidity and mortality from the "coronavirus" in Europe. Thus, we do not understand the optimism of many analysts about the prospects for the British economy. The figures show the British economy is shrinking quite briskly. And thanks to the pandemic, and thanks to Brexit. By the way, forecasts for the final value of GDP for the first quarter in quarterly terms indicate a reduction of 2.6%. Also on Tuesday, industrial production in Britain for February will be published (a drop of 4.4%-4.8% in annual terms and an increase of 0.4%-0.5% in monthly terms is forecast) and the balance of trade in goods (negative, of course). This is all that is contained in the UK calendar for the next week.
Now consider American publications and events. On Tuesday, the consumer price index for March will be published in the United States, and it seems that an information bomb is waiting for market participants here. According to forecasts, inflation in the United States will jump from 1.7% to 2.5%-2.6% y/y. Core inflation may rise from 1.3% to 1.6% y/y. If this happens, then, on the one hand, the target value that the Fed was aiming for will be reached, and on the other hand, such strong inflation, and most importantly its prospects for further acceleration, may already harm the US currency. Thus, this report can cause a reaction of the markets. On Thursday, the States will release reports on retail sales for March (forecast: + 4.5% - +5.5% m/m) and on industrial production for March with a forecast of +2.8% - +3.1% in monthly terms. On Friday, there will be no important publications overseas. Theoretically, all reports from America can affect the movement of the euro/dollar and pound/dollar pairs, although we only bet on the inflation report. However, during the publication of other reports, you should also exercise increased care and caution when trading. No one knows what the real values of the reports will be and how the markets will react to them.
Recommendations for the GBP/USD pair:
The pound/dollar pair on the 4-hour timeframe has formed a new downward trend, which may also be short-term. Now, of course, it is not a "swing", but on the 24-hour timeframe, it is visible that the pair's quotes continue to jump up and down. Thus, we believe that the downward correction (for the long-term plan) will not last too long. Bears are too weak. It is best to use the hourly and lower timeframes in trading now, as they provide a clearer and more accurate technical picture.
Explanation of illustrations:
Price levels of support and resistance (resistance/support) – target levels when opening purchases or sales. You can place Take Profit levels near them.
Ichimoku indicators, Bollinger Bands, MACD.
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