4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - downward.
Moving average (20; smoothed) - downward.
CCI: -192.8999
The British pound collapsed on Tuesday and continued to decline on Wednesday. Thus, as we said in the article on the euro currency, the euro, and the pound are now moving completely differently, which raises some questions. In the article on the euro/dollar, we have already assumed that the pound sterling is now slowly leaving the "speculative" factor. Therefore, if the euro currency is now showing a natural growth due to another increase in the money supply in the United States, then the pound sterling, which previously showed much stronger growth than the euro, cannot repeat this path. Of course, this is only a hypothesis so far. No one knows for sure whether speculators who previously held long positions in the British currency have started to leave the market. But it seems to us that the version voiced above has the right to life. Whether it is true or not, time will tell.
At the same time, US Treasury Secretary Janet Yellen said yesterday that the US economy is recovering rapidly and the country can return to full employment as early as next year. This is confirmed by an earlier report of the IMF, which also noted the high rate of recovery of the American economy, which will not even feel that there was a crisis. The US economy, according to the IMF forecasts, has almost completely returned to the pre-crisis trajectory of economic growth. That is, it has not just reached pre-crisis levels, but is also approaching the growth levels that were predicted for 2021 and 2022 before the pandemic. Yellen also noted that the recovery of US GDP will lead to the growth of the global economy. Although, in principle, this is understandable. The growth of Mongolia's economy will also lead to the growth of the world economy. The US Treasury Secretary also noted that the government still has a lot of work to deal with the consequences of the economic crisis and the pandemic. "We should be careful not to give up on stimulating the economy too soon," Yellen said. Indirectly, the Treasury Secretary acknowledged that the States would not be in a hurry to wind down the quantitative easing program or raise rates. The same idea has been repeatedly voiced by the head of the Federal Reserve Jerome Powell. Thus, in the coming months, there will be no talk of even reducing the asset purchase program. Janet Yellen estimates the current level of the economy as unsatisfactory since the unemployment rate is still too high.
But the head of the IMF Kristalina Georgieva also noted the negative consequences of the exit from the crisis for all countries of the world. The head of the IMF stressed that the total public debt of all countries of the world is approaching 100% of global GDP. He noted that the high level of public debt was noted before the pandemic, but now it has increased even more, as governments around the world had to help their economies. "Revenues have decreased, and expenses have increased," says Georgieva. The IMF president also noted that the growth in total public debt was mainly due to developed and rich countries, which have much more opportunities to service their debts than poor countries. The IMF report also said that most of the developed countries will be able to get out of the crisis with minimal losses. All thanks to strong vaccination programs and the ability to raise government borrowing and spending in times of crisis. But in developing and poor countries, the echoes of the crisis and the pandemic will be observed for a very long time. This is clear even from the fact that in many countries of the world, the vaccination process has not even begun yet. Rich countries share vaccines with poorer countries, but naturally, they are primarily interested in their populations. For example, the European Commission recently noted that it is stopping the export of vaccines, as it has already provided enough assistance under the COVAX program. At the same time, the organization itself is mercilessly criticized for the low rate of vaccination within the European Union. Thus, everything is as always. Any crisis is a time when the rich will get richer and the poor will get poorer. This mechanism also works at the State level.
Returning to the pound, it should now be noted that the price has consolidated below the moving average line, which means that, from a technical point of view, the downward trend has resumed. In the near future, the quotes of the pound/dollar pair can overcome the two previous local lows of 1.3702 and 1.3669. If this happens, the chances of continuing the downward movement will increase many times. And the euro currency can continue to grow at the same time. We have repeatedly said that if we take into account the fundamental background from the UK, the pound sterling should have been trading around the 30th level for a long time. The economy in Britain is far from its pre-crisis levels, although the high rate of vaccination is expected to accelerate the recovery process. It remains to be seen whether the speculators who have kept the pound so high in the past six months have decided to leave the market.
The average volatility of the GBP/USD pair is currently 92 points per day. For the pound/dollar pair, this value is "average". On Thursday, April 8, thus, we expect movement within the channel, limited by the levels of 1.3650 and 1.3834. 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 – 1.3702
S3 – 1.3672
Nearest resistance levels:
R1 – 1.3763
R2 – 1.3794
R3 – 1.3824
Trading recommendations:
The GBP/USD pair started a downward movement on the 4-hour timeframe. Thus, today it is recommended to stay in the sell orders with the targets of 1.3702 and 1.3650 until the Heiken Ashi indicator turns up. Buy orders should be opened in case of overcoming the moving average with the targets of 1.3885 and 1.3916 and keep them open until the Heiken Ashi indicator turns down.
