Hello, dear traders!
Yesterday, GBP/USD traded mixed and closed higher. The fact that the UK's Covid-19 vaccine rollout has been faster than the EU's provides support for the pair. Britain is gradually lifting restrictions. Pubs, sport clubs, and other public places reopen again. Even BoE Governor Andrew Bailey said yesterday that the country was gradually getting back to normal.
At the same time, Bailey underlines that the regulator will remain cautious and notes that interest rates will remain at an ultra-low level until the economy shows signs of recovery from the pandemic. Moreover, the central bank will continue to execute the programme of asset purchases. The Bank of England is unlikely to introduce negative interest rates for at least six months. The coronavirus situation in the UK is improving. Therefore, the introduction of negative interest rates is highly unlikely at the moment. Notably, investors have already included such a possibility into the price of the pound sterling. Probably this is the reason why the currency is now strong.
Daily chart
Yesterday's candlestick looks rather unclear. It has a small bullish body and a relatively long upper shadow. Therefore, I was unsure about a further direction of GBP/USD. The current bullish candlestick, which has already engulfed yesterday's candlestick along with its upper shadow, indicates that bulls are willing to extend the upward trend. Notably, as said in one of the latest reviews of GBP/USD, a false breakout is a distinctive feature of the pound. Today, we will see whether it occurs at the blue Kijun-sen line. As we can see, the line was broken and three candlesticks closed under it. However, the pair is near the line again. A lot now depends on today's closing price. If the session closes above the Kijun-sen, the breakout will be seen as a false one and the price will resume its upward movement. Otherwise, if today's candlestick has a long upper shadow and the price closes below the blue Kijun-sen, we can assume that there has been a pullback to this line. In such a case, it will become possible to open short positions.
H1
Given the above-mentioned closing options, it is hard to give any trading recommendations. As clear from the chart, the current rise in price is likely to be considered a corrective move. We can arrive at such a conclusion based on the Fibonacci grid in the 1.4015-1.3777 range. We can see that the pair is already in the middle of this range passing the blue 50 MA and black 89 EMA. Now, the most important task will be to see how price behaves near the orange 200 EMA. If the price breaks the 50% Fibo retracement and 200 EMA, then the current growth will not be a correction anymore. It will already be a change in the trend. One should consider opening long deals only if the pair consolidates above 1.3900 with the target set close to 1.4000. Otherwise, if a bearish candlestick pattern occurs near 1.3900 on H1 or H4, it will give a signal to open short positions with the closest targets set in the area of 1.3870-1.3860.
Have a nice trading day!
