4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - sideways.
CCI: -9.3750
The British pound sterling paired with the US dollar continues the "swing" on which it has been riding for more than two weeks. In principle, both major pairs are only engaged in trading without a certain direction of movement. And this is already beginning to be alarming. First, this movement makes it very difficult to work on higher timeframes. Secondly, any movement ends sooner or later, and this flat is already something very long. Although, on the other hand, we remember periods when the flat lasted for a month. Thus, the main thing now is to understand that the market is flat. The most interesting thing is that the pound/dollar pair updated its 3-year highs during this flat. How often have you seen this? However, this is the case. The pair retains excellent chances to continue moving north even without a correction, of which there have been few in recent months. All the factors that drove the pound to its 3-year highs persist. So, what else can you expect from a pair that shows a perfectly fantastic move up in terms of the fundamental background in the UK and the US? In principle, it is now impossible to explain the growth of the British currency in fundamental terms. Many analysts believe that the current growth of the British currency is due to the high rate of vaccination of the British population or the lifting of almost all quarantine restrictions in the Foggy Albion. However, we remind you that in the United States, vaccination is also proceeding at a high rate, and most of the quarantine rules have also been lifted. However, the US economy has been recovering for several consecutive quarters while showing record numbers, and the British economy is just beginning to recover in the second quarter. Thus, from our point of view, the pound continues to grow solely on the "speculative" factor, as well as on the factor of pouring trillions of dollars into the American economy.
Meanwhile, Lael Brainard, a Federal Reserve's monetary committee member, said on Tuesday that the US economy continues to move towards its labor and inflation targets. She noted that the Fed would maintain an ultra-soft monetary policy for as long as it takes for the economy to recover and employment levels to peak entirely. "While we are still far from achieving our goals, we see welcome progress, and I expect further growth," Brainard said. Thus, the markets received another proof that the Fed will not wind down its stimulus program in the near future. Not to mention a rate hike. Even if the monetary committee members say that "we are still far from the goals," this means that the economy can be stimulated for another year. Brainard also said that the current number of jobs in the United States is 8-10 million lower than before the pandemic. On inflation, the Fed member said it is important to achieve a steady increase in prices and not a one-time jump. Brainard also noted that some of the factors that currently contribute to the economy's acceleration would disappear over time. For example, budget spending and the desire of households to take full advantage of the opening up of the economy. "And this is another reason why the Fed should not scale back its stimulus program," Lael said. "Implementing our recovery plan during a spike in inflation after the economy has opened up will help provide the necessary economic momentum," said a member of the Fed's monetary committee. Another member of the monetary committee, Randal Quarles, also made a speech. He said that over the past few months, his opinion on inflation has not changed. Quarles believes that the current acceleration in inflation is a temporary phenomenon. Thus, as we said in the euro/dollar report, none of the functionaries are panicking because of inflation, which in May in the United States may approach the value of 5.0% y/y.
Everyone is waiting for the data at the end of the year to understand whether inflation remains at high levels and something needs to be done about it or whether the price jump is temporary. In any case, the Fed will achieve stable inflation above 2% and achieve maximum employment in the labor market. This Friday, a new report on NonFarm Payrolls will be published, showing how many new jobs were created in the reporting period outside the agricultural sector. The answer to this question will help in understanding how quickly the labor market is recovering. If Lael Brainard talks about 8-10 million jobs that should still be caught up compared to the pre-crisis period, this may take a year and a half or two years. Therefore, we return to the Fed's original forecast that the rate will be raised no earlier than 2023. It is reasonable to assume that the incentive program will work for a very long time.
Well, for the pound/dollar pair, all this information is nothing more than just interesting. The day before yesterday, the quotes were declining. Yesterday, they were already growing, and it is impossible to say that the macroeconomic background or the "foundation" has at least some influence on the markets' mood now. The pair stands in one place and does not want to move in any direction. And this is although all global factors speak in favor of continuing the growth of quotes. In general, the upward trend was interrupted not by a correction but by a flat so that buyers could at least have a little rest. Well, the chances of further growth of the British currency have increased even more.
The average volatility of the GBP/USD pair is currently 82 points per day. For the pound/dollar pair, this value is "average." On Thursday, June 3, we expect movement within the channel, limited by the levels of 1.4083 and 1.4247. The reversal of the Heiken Ashi indicator back to the top will signal a new round of upward movement within the "swing."
Nearest support levels:
S1 – 1.4160
S2 – 1.4130
S3 – 1.4099
Nearest resistance levels:
R1 – 1.4191
R2 – 1.4221
R3 – 1.4252
Trading recommendations:
The GBP/USD pair has started a new round of upward movement on the 4-hour timeframe. Thus, today it is recommended to stay in buy orders with targets of 1.4221 and 1.4252 until the Heiken Ashi indicator turns down. Sell orders should be opened in the event of a reversal of the Heiken Ashi indicator downwards with targets of 1.4130 and 1.4099. The pound is now also moving flat.
