In today's review of the GBP/USD currency pair, we will conduct a technical analysis of these two most senior timeframes and try to determine the further direction of this trading instrument. However, let us first briefly talk about what was remembered last week and about the most important events that await the pound/dollar pair at the auction of the current five-day period. Last week's main event was the results of the extended April meeting of the US Federal Reserve System (FRS). This event has already been covered in more detail. Still, if we briefly summarize it once again, the Federal Reserve does not plan to make changes to the scope of the quantitative easing program, which is also called QE, as well as to switch to the course of tightening its monetary policy and start raising interest rates. According to Fed Chairman Jerome Powell, the current course of his department will continue until it is finally clear that the economy has fully recovered from the effects of COVID-19, the labor market does not gain the strength that was observed before the coronacrisis, and inflation is not firmly anchored near the Fed's target level of 2% or slightly higher. By the way, Powell considers the current increase in inflation to be a temporary factor influenced by consumer sentiment and high household spending, which is not at all surprising given the process of economic recovery.
This week, it is necessary to highlight the two most important events that can significantly affect the price dynamics of the GBP/USD currency pair. First, this is a meeting of the Bank of England, following which a decision on the interest rate, the volume of the asset purchase program will be announced, and the accompanying statement of the British Central Bank will be published. And the very next day, on Friday, data on the US labor market will be released, which will be closely examined and studied by market participants. More details about these and other macroeconomic events will be mentioned directly on the day of their release, and now we will turn our attention to the price charts.
Monthly
Although the pound/dollar pair showed a slight increase in April, there are questions about the further direction of the quote in the north direction, and here's why. As you can see, the attempts of the bulls for the pound to go up the black 89 exponential moving average and break through the key resistance zone of 1.4000-1.4015 were again doomed to failure. Moreover, April trading ended below another significant and strong technical level of 1.3900. As a result, last month, there was a candle with a particularly long upper shadow, which indicates serious problems of the players on the appreciation in their ability to continue to move the quote up. In addition, an attempt to update the maximum trading values of March at 1.4015 was blocked by the upper border of the Ichimoku indicator cloud, which in April passed near 1.4015. Since the upper limit is lower (at 1.3957) this month, the resistance zone on the monthly timeframe will be considered 1.3957-1.4015. Only a confident close of May trading above 1.4015 will indicate a high probability of a subsequent increase in the British currency against the US dollar. However, looking at the last three monthly candles, it is hard to believe in such a scenario. I am more inclined to assume a downward movement, the targets of which may be 1.3667 (April lows), 1.3600, 1.3565, and even lower the most important psychological and technical level of 1.3500 and strong support at 1.3450.
Weekly
According to the results of the last five trading days, the "Briton" suffered losses against the US dollar, which amounted to 0.48%. And on this timeframe, the bulls have problems. First of all, this is the inability to return the quote to the abandoned ascending channel and pass up the red line of the Ichimoku Tenkan indicator. Since more than three candlesticks have been fixed under the lower border of the channel in a row, the exit from it can be considered true, which means that with a high degree of probability, we can count on a subsequent decline in the British currency. If this happens, then the most important and decisive moment will be the ability of the bears to push through the strong support level of 1.3667, which will undoubtedly strengthen the blue line of the Kijun Ichimoku indicator, located right at this mark.
Trading recommendations for GBP/USD
Based on the technical picture at the two most senior time intervals, I most likely assume a downward scenario, which implies the sale of the pair. However, this does not cancel the attempts of the bulls to continue the rise of the quote once again. After such attempts, which are likely to be unsuccessful, I propose to consider opening short positions on GBP/USD. At this point, the most technically sound selling zone looks like 1.3850-1.3900. If we consider higher and more attractive prices for sales, then this is the area of 1.3950-1.4000. For now, I recommend setting targets for short positions in the strong price zone of 1.3700-1.3670. In tomorrow's article on this currency pair, we will look at the lower timeframes, and if necessary, we will make adjustments to today's trading recommendations.
