July 6, 2021

Overview of the GBP/USD pair. July 6. The UK is celebrating the 5-year anniversary of the Brexit decision.

 Technical details: 

Higher linear regression channel: direction - upward. 

Lower linear regression channel: direction - downward. 

Moving average (20; smoothed) - sideways. 

CCI: 81.8919

The British pound, paired with the US dollar, continued its upward movement on Monday that began on Friday when important statistics on the labor market were published in the States. More precisely, the report on the unemployment rate and the Nonfarm Payrolls report. We have already said that, from our point of view, the reaction of traders to Friday's statistics in the United States was illogical. However, given that the fall of the US currency continued on Monday, it is no longer possible to call it a coincidence. Thus, in cases with both major pairs, it is possible to complete the downward trends. However, we expected and continue to expect a fall in the euro/dollar to the level of 1.1700, and the pound/dollar to 1.3666. However, the downward movement may end earlier. Recall that in the long-term plan, we still expect the resumption of the upward trend. Thus, in any case, we expect a resumption of upward movement to three-year highs near the level of 1.4240. Therefore, we can say that the pair is now influenced by global fundamental factors, as well as global technical factors, of which there are very few. But there are practically no local factors that could have a serious impact on the mood of market participants. The fact is that macroeconomic statistics continue to be worked out by the markets very selectively. For example, last week, several fairly important reports from the UK were completely ignored, and on Friday, the markets responded to a strong report on Nonfarm with sales of the US currency.

Meanwhile, in the UK, interim results were recently summed up. Five years ago, on June 23, 2016, a referendum was held in which the majority of Britons voted to leave the European Union. Five years have passed and one of the main supporters of Brexit, Boris Johnson, shone during his speech. The British Prime Minister noted that the decision to leave the EU was the right one, and the country will reach its full potential as soon as the pandemic is over. Boris Johnson also said that he is going to use the full power of the returned sovereignty, as well as significantly improve the standard of living of British citizens. According to Johnson, even in the few months during which Britain is outside the European Union, there are already positive changes. For example, London has managed to regain full control over spending, legislation, and its borders. But the British people themselves, who should be thanked for the fact that there was a gap between the Kingdom and the Alliance, still can not decide whether it was worth leaving the EU at all? Five years ago, only 51.9% of Britons voted to leave the EU. This is very little to talk about the "majority" or "popular opinion". According to in-depth sociological research, if the Brexit referendum had happened now, 51% of Britons would have voted to remain in the EU. We can assume that the number of people who do not want to be independent of the EU over the past five years increased. However, 51% of respondents also said that they would not like to join the European Union again, 31% called Brexit a success, and 34% called it a failure. Thus, even 5 years after the fateful decision in the UK, opinions about Brexit are divided approximately 50/50. In general, for many, Brexit is still a very controversial initiative. For the UK economy, it is still impossible to say that Brexit has become something positive. Boris Johnson and the entire British government were frankly lucky with the pandemic, since now any decline in macroeconomic indicators can be attributed to the pandemic, and Brexit and its negative consequences can be masked. Moreover, we see that public opinion in Britain is divided approximately in half on Brexit issues. Thus, for the current government to continue to remain in its place, the attitude towards Brexit among the British must be as friendly as possible. And to do this, you need to exaggerate the impact of the pandemic as much as possible and minimize the impact of Brexit.

Returning to the economy, the British one still feels much weaker than the American one. However, this still does not play a special role for the pound. Over the past year and a half, the British pound has mainly strengthened against the US dollar. If at the beginning of this period such a movement was logical, since it was the American economy that lost the most in the second quarter of 2020, then by the end of 2020, such a movement began to break out of logic, since it was the American economy that began to recover at the fastest pace in the world. Now, this is exactly what is happening: the US GDP is growing very quickly and strongly, which can not be said about the British GDP, but in general, in the long term, it is the British pound that continues to strengthen. From our point of view, there is still a global fundamental factor called "we print as much money as we want" performed by the Fed and the Treasury. That is why the money supply in the United States is growing (as shown by the corresponding macroeconomic indicators), inflation is growing, and the US dollar can show growth only for a short period. Since global factors have not changed in any way recently, we can assume that everything will remain out of place and the balance of power between the dollar and the pound will not change. It is exactly the scenario we are counting on. In the long term, we expect a further fall in the US currency. In the short term, the pair needs to confidently gain a foothold above the moving average line.

The average volatility of the GBP/USD pair is currently 74 points per day. For the pound/dollar pair, this value is "average". On Tuesday, July 6, we expect movement inside the channel, limited by the levels of 1.3779 and 1.3927. A reversal of the Heiken Ashi indicator downwards signals a possible resumption of the downward movement.

Nearest support levels: S1 – 1.3794 S2 – 1.3733 S3 – 1.3672 

Nearest resistance levels: R1 – 1.3855 R2 – 1.3916 R3 – 1.3977

Trading recommendations:

The GBP/USD pair continues its upward correction on the 4-hour timeframe and may soon overcome the moving average. Thus, today it is recommended to open new sell orders with targets of 1.3794 and 1.3779 in the event of a price rebound from the moving average line. Buy orders should be opened if the price confidently overcomes the moving average, with targets of 1.3916 and 1.3927.