Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - downward.
Moving average (20; smoothed) - sideways.
CCI: -12.2549
The British pound unexpectedly fell on the second trading day of the week. At the same time, it is quite difficult to find good reasons for such a movement of the pound/dollar pair. Yesterday, the UK did not publish a single important macroeconomic report, there was no single important fundamental event. Thus, the fall of the pound while the euro currency was firmly in one place raises questions. Moreover, it began in the morning, that is, the reasons do not lie in the States and the US dollar. But nothing extraordinary happened in the UK. Thus, now the so-called "swing" can begin. When the price starts jumping from side to side for no apparent reason. In principle, the pound has repeatedly experienced such trend segments over the past year. And given the fact that the trend in the pound itself in the last 6-7 months raises a huge number of questions, now nothing should be surprising. Recall that the pound sterling has become more expensive in the last 6-7 months (except for the last few weeks), although there were no fundamental reasons for this. All news from the UK, except for those concerning the vaccination of the population and the "coronavirus" epidemic, is negative. The European currency began to adjust in early January, while the pound continued to grow for another month and a half. Thus, we also believe that the global factor of pumping the US money supply can and does play an important role in the fall of the dollar against its main competitors, but in the case of the pound, this fall is too strong, and the correction is too small. Therefore, in general, we consider the movements of the pound over the past six months to be far from the most logical. This means that the drop in quotes yesterday may be just another illogical movement of the pair.
Meanwhile, US Treasury Secretary Janet Yellen, as the media found out, is going to call on all countries of the world, especially various offshore companies, to introduce a minimum single income tax for multinational corporations. The proposal comes just days after Joe Biden announced another stimulus package of more than $ 2 trillion, which will be formed by raising taxes for rich Americans and large companies. Thus, now the US government believes that some American companies will try to avoid falling under the new taxes, which should increase from 21% to 28%. Consequently, some of them may flee to more tax-loyal countries. According to Yellen, in many countries, taxes on profits for companies are set at a minimum, which allows companies to register in such countries and avoid paying taxes before returning profits to their home countries. According to Janet Yellen, a single income tax rate for large corporations will make it pointless for countries to race to attract foreign companies to their territories. Recall that 4 years ago, before the Trump presidency, the income tax for large companies in the United States was 35%. It was to return production to their homeland that Donald Trump lowered this tax. However, as the practice has shown, American companies were in no hurry to build factories in the United States, since there are a huge number of countries in the world where it is much more profitable to place the production of any goods. After all, it's not just about taxes, but also, for example, logistics or labor costs. Thus, Trump's plan to return American companies to their homeland failed, and with the arrival of Joe Biden, a Democrat, taxes in any practical case should have been increased. Just now, all this is served under the sauce of the need to form another package of incentives for the economy. But the Biden administration and the Treasury Department also understand that raising taxes could trigger a new outflow of companies abroad. So now Janet Yellen will call on all countries of the world to impose the same corporate income tax for all to keep American companies in their country. Why do all the other countries of the world need this? Of course, Yellen tried to justify her proposal with large tax revenues to the treasury of every country in the world. After all, taxes will be raised. In practice, countries with low or zero taxes can, on the contrary, lose foreign companies that create jobs for them and, in any case, develop their economy just because of the lack of taxes. For what? For these companies to return to the States or move their production to China or Malaysia, figuratively speaking? In general, so far, Janet Yellen's proposal looks very strange and ambiguous, but it is quite logical for the United States itself.
As for the pound/dollar exchange rate, now you will need to watch it for a few days to clearly understand whether the downward trend will resume, or whether the upward movement will continue. For the pound sterling, the level of 1.4000 is now of great importance, from which earlier, over the past month and a half, the price bounced at least 5 times. Thus, if this level can be overcome, the "bullish" mood among market participants will sharply increase. Also, we should not forget that the British currency can once again receive support due to the infusion of trillions of dollars into the American economy. In general, for now, we need to understand what is happening.
The average volatility of the GBP/USD pair is currently 88 points per day. For the pound/dollar pair, this value is "average". On Wednesday, April 7, therefore, we expect movement within the channel, limited by the levels of 1.3726 and 1.3902. The reversal of the Heiken Ashi indicator back to the top can signal a new round of upward movement.
Nearest support levels: S1 – 1.3794 S2 – 1.3763 S3 – 1.3733
Nearest resistance levels: R1 – 1.3824 R2 – 1.3855 R3 – 1.3885
Trading recommendations:
The GBP/USD pair started a downward movement on the 4-hour timeframe. Thus, today it is recommended to open new buy orders with targets of 1.3885 and 1.3902 if the price bounces off the moving average line. Sell orders should be opened after overcoming the moving average with targets of 1.3763 and 1.3726 and keep them open until the Heiken Ashi indicator turns up.
