Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - upward.
CCI: 142.4544
The British pound was also trading higher on Tuesday. If the European currency found the strength to correct in 2020 (the correction took three months), the pound adjusted "for show" and now has long continued the upward trend, which also began last year. The pound has already come close to its 3.5-year high and completely ignores the fundamental and macroeconomic background. When the level of 1.4240 is finally overcome, the target will be a 6-year high of the pair - 1.5017. As in the case of the European currency, global factors have continued to work for about a year: the factor of flooding the American economy with trillions of dollars, the "speculative factor," and the technical factor of changing the global trend. Thus, whatever the current macroeconomic statistics, it does not have much impact on the dollar and pound exchange rates. Plus, we remind you that there are a huge number of problems in the UK. Both economic and geopolitical. However, they do not play a special role. Therefore, we conclude that the pound will continue its illogical growth. But what can you do if there are more and more dollars every day and market participants believe in the further growth of the British pound? Perhaps the only positive news from the Foggy Albion is the lifting (gradual) of quarantine restrictions, which will gradually revive the economy. Vaccination of the population is taking place at one of the highest rates in the world. However, the United States is not far behind in this matter. Quarantine restrictions are also lifted, and the vaccination rate of the population is not inferior in speed. Thus, the strengthening of the British pound cannot be attributed to this factor.
Meanwhile, differences between the EU and the UK on several issues related to Brexit remain. Recall that in December 2020, a trade agreement was agreed, which turned out to be commercial. It does not take into account the service sector and the financial services sector. And Britain needs the financial services sector more because London has always been the world's financial capital. However, since the country's exit from the EU, it is no longer such, since the monetary volume of transactions is already higher, for example, in New York or Amsterdam. However, this area is still very important for the British, and they would like to sign new agreements with the EU that will regulate their financial relations. After all, the European Union is a 400-million strong market. However, Paris recently said that the UK does not grant access to European vessels in its waters, as agreed in the trade deal. Recall that it is the "fish question" - a stumbling block in the negotiations between Brussels and London, although the volume of GDP, which provides fish catch by the British, does not exceed 1%.
Nevertheless, London wanted to have complete control over its waters. It seems that the parties managed to agree that European vessels will be able to catch fish and seafood in British waters. However, at the same time, there will be specific quotas for catching and repatriating the catch, and the terms of the agreement will be reviewed every few years. France has said that Britain is not complying with the terms of the agreement. Thus, the European Union does not see the point in discussing new agreements with London until all the already-complexed deal conditions are fully met. Earlier this year, the European Union accused London of unilaterally changing some "Northern Ireland Protocol," although it had no right to do so. At that time, the issue concerned preferential conditions for the transportation and customs clearance of certain types of goods between Ireland, Northern Ireland, and the rest of the UK. The EU has threatened legal action. However, Boris Johnson proposed a plan to change some of the controversial terms months later gradually. The reaction of the EU is still unknown. The fact is that the negotiations between London and Brussels were very difficult last year and will continue to be so in the coming years. There is no doubt that Britain will want to be as close to the European market as possible, so it is unlikely to give up trying to sign new agreements. Moreover, we have not heard anything about a trade deal with America recently, although this issue was almost practically resolved during the time of Donald Trump.
We have already talked about the "Scottish question" and the riots in Ireland many times. There is no news here. However, both of these issues remain pressing for Britain and could create new problems in the future for the Kingdom, which many experts believe has begun the process of its collapse. Scotland may leave Britain, and separatist sentiments are growing in Northern Ireland, which is also not happy about leaving the EU and the appearance of a border with neighboring Ireland. Thus, total independence is still very expensive for London and Boris Johnson. First, the British Parliament received information that the Prime Minister was ready to sacrifice thousands of lives to avoid introducing a "lockdown" last year. Then there were questions about the cost of the expensive renovation of Johnson's apartment at 11 Downing Street. Then came the story of Johnson's New Year's holiday at a villa on the private island of one of the Conservative Party's sponsors. Thus, the relevant committees of the British Parliament are now dealing with these issues.
The average volatility of the GBP/USD pair is currently 78 points per day. For the pound/dollar pair, this value is "average." On Wednesday, May 19, we expect movement within the channel, limited by the levels of 1.4112 and 1.4268. A reversal of the Heiken Ashi indicator downwards may signal a round of downward correction.
Nearest support levels: S1 – 1.4160 S2 – 1.4099 S3 – 1.4038
Nearest resistance levels: R1 – 1.4221 R2 – 1.4282
Trading recommendations:
The GBP/USD pair resumed its upward movement on the 4-hour timeframe. Thus, today it is recommended to stay in long positions with the targets of 1.4221 and 1.4268 until the new turn of the Heiken Ashi indicator down. Sell orders should be opened if the pair's quotes are fixed below the moving average with a target of 1.4038.
