InstaForex

August 18, 2021

Overview of the GBP/USD pair. August 18. The Afghan crisis supports the US currency.

 Technical details: 

Higher linear regression channel: direction - downward. 

Lower linear regression channel: direction - upward. 

Moving average (20; smoothed) - downward. 

CCI: -150.6424


The British pound also unexpectedly fell on Tuesday. However, if the European currency began to fall only in the afternoon, the British pound began to fall on Monday and did not stop even during the Asian trading session. Thus, quite unexpectedly, the US currency began to grow again. Macroeconomic indicators and the fundamental background associated with the economy do not play any role in the current drop in quotes. The fact is that there was simply no important economic news from the UK and the US at the beginning of this week. There were no speeches by Andrew Bailey, Boris Johnson, or anything else in the UK. In the States - also nothing extravagant.


Moreover, all the macroeconomic statistics of Tuesday had no impact on the course of trading. The British currency began to become cheaper much earlier than when it was published (we are talking about both data from the US and data from the UK). And when all the reports were published, the nature of the movement did not change at all. Thus, it seems that the demand for the American currency is growing due to the difficult situation in Afghanistan, where the extremist organization "Taliban" has seized power in the country, and the American and British armed forces are leaving it. The fact is that the US dollar has long been the world's reserve currency. Most of the world's reserves are formed in the US dollar since this currency is considered the most stable. Thus, when the next crisis begins, the demand for the reserve currency is growing. The markets do not like uncertainty, geopolitical tensions, so the events in Afghanistan could provoke an increase in demand for the US dollar. Thus, literally out of the blue, the US currency receives an additional growth factor. Recall that the first factor is a very likely curtailment of the Fed's quantitative stimulus program in the coming months. Thanks to these two factors, the US currency may continue to grow for some time. However, now it is a rather difficult time to analyze and consider all the fundamental factors. Because global factors still speak in favor of the fall of the US currency. Will they be outweighed by more local fundamental factors that are becoming more significant day by day?


At the same time, Prime Minister Boris Johnson decided to convene a meeting of G-7 leaders because of the crisis in Afghanistan. The British government intends to make every effort to speed up the evacuation of its citizens from Kabul. During the conversation between Emmanuel Macron and Boris Johnson on Monday, preventing migration and humanitarian crises were discussed. Now all the G-7 countries should come together and discuss the problem that has arisen, Boris Johnson believes. The British and American authorities are ready to impose sanctions against the new government of Afghanistan if it does not ensure respect for human rights, and the country becomes a springboard for global terrorism. "We will have to deal with a new reality. We want to make our position clear together with our partners: we will demand that the Taliban comply with its obligations," said Dominic Raab, a member of the British government. Raab also noted that he was surprised by the speed with which the Taliban captured the country. Now, the British government will make every effort to withdraw British citizens from Afghanistan. London is currently sending military personnel to Kabul to ensure the safety and evacuation of subjects of the British Empire.


From a technical point of view, the downward trend remains in force as the price continues to be located below the moving average line. And yesterday's drop in quotes further increases the chances of a further fall in the British currency. At this time, there may be some panic in the foreign exchange market, as well as uncertainty. Recall that in recent weeks, both major currency pairs very often stood in one place, showed minimal volatility, and also moved frankly reluctantly. We said that perhaps the markets are just waiting for some push, an important event that will become the starting point for a new strong movement. Perhaps we have waited for this event. Although we are still counting on a new powerful strengthening of the British currency, at the moment, the US dollar is in demand, and the technical picture speaks in favor of continuing to move south.


The average volatility of the GBP/USD pair is currently 81 points per day. For the pound/dollar pair, this value is "average." On Wednesday, August 18, we expect movement inside the channel, limited by the levels of 1.3674 and 1.3836. A reversal of the Heiken Ashi indicator upwards will signal a new round of upward correction.


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 continues to be located below the moving average on the 4-hour timeframe. Thus, today, it is necessary to remain in the pair's sales with the targets of 1.3702 and 1.3674 until the Heiken Ashi indicator turns upwards. Buy orders should be considered if the price is fixed back above the moving average line with targets of 1.3855 and 1.3916, and keep them open until the Heiken Ashi turns down.