4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - downward.
Moving average (20; smoothed) - sideways.
CCI: -36.4369
The British pound started an upward movement on Friday and Monday. Thus, at the moment, the total correction within the annual upward trend was about 560 points, which is less than in the euro currency. Once again: the pound, subject to the failed fundamental background from the UK, which was in 2020 and deteriorated further in 2021, has risen by 27 cents over the past 12 months and adjusted by 5.5. In the last two trading days, the pound began to rise, although the European currency continued to fall at the same time. What are the reasons for the new strengthening of the British currency? To begin with, the macroeconomic statistics from the UK over the past week could hardly please anyone. Only the unemployment rate in January showed a positive trend and decreased to 5%. But the number of new applications for unemployment benefits in February increased by 87 thousand, which was completely unexpected by market participants. Inflation, which was low even before the last report, has fallen into the abyss. Business activity indices rose in March, but so far this has not been reflected in other important macroeconomic indicators. Retail sales rose 2% after falling 8% a month earlier. That is, everywhere either a meaningless improvement or a new deterioration. Thus, the UK currency is unlikely to start growing on Friday, based on "macroeconomics", especially since there was no particularly important and strong news in the United States on this day. I don't even want to talk about the foundation now, because so much has been written about it that it will be enough for several textbooks. In short: the fundamental background is now extremely weak in the Foggy Albion. The trade deal that British politicians have called "life-saving" is not so good in reality. Yes, it may have prevented even more serious economic consequences, but to call it positive for the British economy is not the language. It should only be noted that it does not affect the service sector and, especially, the financial services sector, which has a key role for Britain. Further, for the British manufacturers that were supposed to be protected by this deal, hell has already begun in January. Of course, you can't just blame everything on Brexit, the pandemic has also left an indelible mark on the British economy. Especially the fact that there was a lockdown in Europe this winter, and two lockdowns in the UK. Nevertheless, in the first months of 2021, the UK recorded a record drop in exports and imports with the EU countries. Most of all, of course, the food sector has suffered, which is subject to increased requirements in times of a pandemic. According to the British Food and Drink Federation, cheese exports fell by 84%, whiskey exports - by more than 60%, chocolate - by 68%. Exports of beef and salmon fell to almost zero. The same thing works in the opposite direction since British imports also lost about a large number of percent in total (the exact figures vary, but from 20 to 40%). As usual, small producers suffered the most. Thus, large businesses, which are subsidized from the country's budget, will certainly survive, but small and medium-sized businesses will feel bad for a long time.
However, this is a normal situation for times of a pandemic. It's just that in the UK, the pandemic and the crisis are exacerbated by Brexit. Everything seems to be natural, except that the pound manages to continue to grow in such conditions. This week, the UK will publish only one more or less significant macroeconomic report – on GDP for the fourth quarter of 2020 in the second estimate. Recall that a month earlier, this indicator surprised many, as instead of the predicted "minus", the British economy added 1%. In the second assessment, this value can be revised. Of course, we are inclined to believe that it will be revised for the worse.
And finally, look at the strongest growth in the M1 money supply in the United States at the beginning of 2021. This figure rose from $ 6,750 billion to $ 18,411 billion in January-February 2021. We have repeatedly said that the growth of the money supply leads not only to inflation but also to the depreciation of the national currency. From our point of view, such charts perfectly outline the prospects of the US dollar for 2021. And in the case of the pound, where there seems to be a speculative factor at work, the situation is even worse, as market participants continue to diligently ignore the fundamental background. And without taking into account the "foundation" - most of the factors in favor of the pound sterling. Here we should also recall the recent COT reports, which spoke of a strong weakening of demand for the British currency among large and professional players. However, the demand may fall, but the supply of US currency in the foreign exchange market is growing because the US authorities continue to pour trillions of dollars into the American economy. Thus, the COT reports can say that the demand for the pound is falling, and the statistics show that the supply of the dollar is growing, which negates the fall in demand for the pound. As a result, the British currency can calmly continue to rise in price in 2021.
The average volatility of the GBP/USD pair is currently 88 points per day. For the pound/dollar pair, this value is "average". On Tuesday, March 30, therefore, we expect movement within the channel, limited by the levels of 1.3692 and 1.3868. The reversal of the Heiken Ashi indicator back to the top can signal a new round of upward movement.
Nearest support levels:
S1 – 1.3733
S2 – 1.3672
S3 – 1.3611
Nearest resistance levels:
R1 – 1.3794
R2 – 1.3855
R3 – 1.3916
Trading recommendations:
The GBP/USD pair has consolidated above the moving average line on the 4-hour timeframe. However, during yesterday's trading, it tried to return below the moving average. Thus, today it is recommended to open new sell orders with targets of 1.3733 and 1.3692 if the price successfully overcomes the moving average. It is recommended to consider buy orders with targets of 1.3855 and 1.3916 if the price bounces off the moving average line.
