Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - downward.
Moving average (20; smoothed) - sideways.
CCI: -33.0200
The British pound was also trading higher on Monday. However, last week, the pound/dollar pair maintained a downward trend, so an upward movement on Monday can mean one of two things: either a new round of upward movement within a certain subspecies of "swing", or a new powerful round of upward movement. The first option is supported by a huge number of different factors that can affect the pound and the dollar. It can be very difficult for market participants to make an unambiguous and general decision to start moving the pair in one direction. The second option is supported by the fact that the general opinion of the majority of market participants may not be needed at all, since due to a new strong increase in the volume of money supply in the United States, the US currency may begin to fall in price again due to absolutely market mechanisms, which are expressed by banal supply and demand. If the supply increases – the price falls. Thus, although it is now very difficult to find something positive in the UK, it is the pound that can resume the global upward trend that we have been observing for more than a year. After all, that trend was also quite baseless, from a fundamental point of view.
As for any new fundamental data, they simply do not exist. There was no new information on Monday either. It is only worth noting that the pound began to grow from the very morning of Monday, that is, when the speeches of the representatives of the Bank of England, Andy Haldane, and Silvana Tenreiro, had not even begun. These are not the most important events in the world of finance and currencies, but they could still affect the British pound. But what difference does it make if the pound started to rise in price in the morning? Thus, we remain with our previous opinion: all that we have seen in recent weeks is a banal technical correction against the upward trend. Accordingly, there is a greater chance of resuming the growth of the pair's quotes, despite the failed fundamental background from Foggy Albion.
Nevertheless, sooner or later, the pumping of money into the American economy will stop. Perhaps it will even happen in 2021 (closer to its end). Logically, the situation is as follows: the epidemic in the United States is on the decline, vaccination is progressing at a high rate, the economy is recovering, anxiety among the American population is subsiding, the country is returning to the usual course of life, Americans are beginning to spend money more willingly (because they have become more thanks to incentive programs and thrift during the quarantine), there is a strong deferred demand, the economy explodes even more, but sooner or later the money from the Americans (extra) will run out, so the constant injections into the economy of "new" amount of money will stop. At this point, the balance of money supply in the UK (and the European Union) and the US will again come to a certain value, which will not change every month and the markets will be able to "dance" from this new value. Then the strength of the British and US economies will be taken into account, and that's when the US dollar can start to be in demand again. Strictly speaking, if the US dollar has depreciated in the last year, largely due to the growing money supply in America, then it is not the markets that are to blame for the dollar's fall. After all, it is not the markets that sell off the US currency and buy the pound. This amount of dollars increases, so its rate decreases. Of course, the COT reports also show the continuing "bullish" mood of professional players, and there is a "speculative" factor. Thus, it turns out a whole set of various factors that caused the long-term strengthening of the British currency. And they can also cause new growth of the pound in the coming months and even a year.
At the same time, Fed Chairman Jerome Powell on the air of the CBS TV channel urged not to rejoice ahead of time in the recovery of the US economy. According to Powell, the American economy has reached a turning point, but this moment is more like a fork in the road. On the one hand, there are expectations of faster GDP growth and a better labor market, on the other hand, there are still high risks of a new wave of coronavirus if the economy opens up too quickly. The head of the Federal Reserve recalled that it was the pandemic that had a key impact on the economy in the last year, respectively, until the complete victory over it, we can not assume that the worst is behind us. Powell advised all Americans to continue wearing masks and adhere to social distancing. Jerome Powell also predicted that in the coming months, the regulator expects strong growth in the number of jobs, and the economy may even approach the value of maximum employment. However, Powell's optimism was not perceived by the markets in any way, the US currency was still cheaper on Monday.
What is the result? As a result, the pound/dollar may continue its upward movement in the coming days with the goal of the Murray level of "8/8"-1.3916. The same level is the previous local maximum for the pair. If a new segment of the upward trend begins, the upward movement will continue above this level. If the "swing" continues, then this level is unlikely to be overcome by buyers. An important rebound was made yesterday - from the Murray level of "0/8"-1.3672. The same level was the previous local minimum. The bears did not manage to overcome it, so the "double bottom" technical pattern was formed, which also predicts a further increase in the British currency quotes.
The average volatility of the GBP/USD pair is currently 97 points per day. For the pound/dollar pair, this value is "average". On Tuesday, April 13, thus, we expect movement within the channel, limited by the levels of 1.3646 and 1.3840. The reversal of the Heiken Ashi indicator back down may signal the resumption of the downward 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 has started an upward correction on the 4-hour timeframe, but the price is still below the moving average. Thus, today it is recommended to open new sell orders with targets of 1.3702 and 1.3672 in the event of a price rebound from the moving average. Buy orders should be opened in case of overcoming the moving average with the targets of 1.3824 and 1.3855 and keep them open until the Heiken Ashi indicator turns down.
