What can we say about the pound ahead of the new trading week? The movement of the "swing" type continues on the pound/dollar pair. At the same time, the upward trend is also maintained, and all movement after February 24 is interpreted as a correction. However, it is still a weak correction, as the upward trend from the minimum to the maximum was 28 cents, and the correction was 5. Moreover, the "swing" movement continues. The entire last round of the upward trend, which took about five months, also took place under the "swing" flag. It can be seen in the illustration above. Thus, nothing changed for the pound last week. If the euro clearly shows short-term trends that add up to long-term trends, then the pound is now undergoing a correction, and its internal turns are very difficult to work out on the charts above the hourly one. At the end of last week, the quotes resumed their downward movement, as we warned: within the "swing," movements of 250-300 points should alternate. Thus, we expect the downward movement to continue next week. As for the fundamental background, it doesn't matter now. We have repeatedly listed all the problems of the UK and its economy. At first, it was a list of political and economic problems, mostly related to Brexit and the pandemic. Now geopolitical problems have been added to it, and economic ones have worsened. However, the pound is still too high relative to such a fundamental background from the Foggy Albion. The US fundamental background is also not too important now, as it is crossed out by the trillions of dollars that the US authorities and the Fed are pouring into their economy. They are pouring and are going to pour in 2021. Probably, this and "speculative" factors are the reasons that keep the pound so high.
Next week, there will be no large amount of "foundation" and "macroeconomics" again. And what difference does it make if most of both are ignored? This conclusion is especially relevant when we talk about the pound/dollar. However, it is not recommended to completely ignore statistics and news because they can still cause a market reaction. On Monday, the US should pay attention to the index of business activity in the manufacturing sector ISM. Its value will be very high, so it is unlikely that traders will react to it in any way. On Tuesday, the UK will release the index of business activity for the manufacturing sector and a high forecast for April. On Wednesday, you should follow the report from ADP on changes in the number of employees in the US private sector and reports on business activity in the services sector from ISM and Markit. However, we believe that there will be no reaction to this data. The ADP report interested the markets even before the pandemic. On Thursday, the most interesting event of the week will take place – the meeting of the Bank of England. As in the Fed's case, no one expects any changes in monetary policy from the British regulator. However, if the Fed was expected to at least hint at a possible curtailment of the quantitative stimulus program, then no one expects "hawkish" hints from the Bank of England at all. The US economy is now recovering at a pace that suggests the end of the stimulus process in the foreseeable future.
In the UK, GDP is expected to fall again by 1.4% in the first quarter of 2021, while the US economy grew by 6.4%. So, what "hawkish" hints can we expect from the British regulator? Therefore, the most interesting event will be the Bank of England's monetary policy report and Andrew Bailey's speech. On Friday, the US will publish Nonfarm Payrolls, the unemployment rate, and the change in average wages. I want to say that a report on Nonfarm Payrolls can provoke a strong reaction. For those who do not remember, we recall that the euro and the pound then lost 10-12 points, although the number of new jobs created in the non-agricultural sector of the United States was 916 thousand. Thus, whatever the value of Non-Farms for April does not guarantee that there will be at least some market reaction.
Thus, most of the reports and events of the coming week will potentially not cause any market reaction. Therefore, the same movement that is observed will continue.
Recommendations for the GBP/USD pair:
The pound/dollar pair on the 4-hour timeframe is trying to start a new downward trend. Although, of course, it is quite difficult to call a movement of 250-300 points a "trend." At the moment, the pair's quotes are fixed below the critical line and the Ichimoku cloud, so the downward movement should continue next week. However, such movements completely fit into the "swing" mode, when the pair alternates periods of growth and fall of 250-300 points. Therefore, we expect to descend to the area of level 37 within the next five working days.
