InstaForex

August 31, 2021

Overview of the GBP/USD pair. August 31. All attention is paid to Nonfarm Payrolls and the ADP report. The dollar will try to find support from them.

 Technical details: 

Higher linear regression channel: direction - downward. 

Lower linear regression channel: direction - downward. 

Moving average (20; smoothed) - sideways. 

CCI: 76.8881


The British pound was also trading very sluggishly against the US dollar during Monday. However, even this is not particularly surprising. On Monday, there were no important macroeconomic statistics, and the pound recently also does not disdain to spend a couple of days a week in a weakly volatile flat. Thus, after the quotes "soared" by 80 points on Friday after the speech of Jerome Powell, the markets considered that at least one day of a break was needed. And this day turned out to be Monday very conveniently. The price continues to be located above the moving average line. However, please note that only in the last few days has it crossed the moving average line several times. Thus, nothing prevents it from gaining a foothold back below the moving average today, and tomorrow it will be higher again. It suggests that traders are currently unable to decide on the direction of movement. In the most long-term perspective, a downward trend persists on the 4-hour timeframe because both linear regression channels are directed downwards. However, we believe that the key value for the prospects of the pound/dollar pair is the level of 1.3600, which the price has failed to overcome twice in recent weeks and which is the previous local minimum. Thus, we should start from this level when developing a trading strategy for the coming weeks. We believe that the round of corrective movement against the global upward trend has been completed. Therefore, a new round of upward movement can now begin with a minimum target of 1.4240. Thus, the periods when the price will be located above the moving average can be used for active trading for an increase. Most of the fundamental factors also speak in favor of further growth of the British currency and the fall of the American one. We remind you that the bears did not have enough strength to correct the pair even by 23.6% (from the entire upward trend that began back in March 2020). Thus, if we are talking about weakness now, then first of all about the weakness of the bears.


In the meantime, we should understand what macroeconomic statistics are waiting for us this week and how they can affect the movement of the pound/dollar pair. There is not much to say about Monday since there was no single important publication or event on that day. There are also no important events scheduled for Tuesday in the US and the UK. Only the consumer confidence indicator is marked as "important" in the news calendar, so you should pay attention to it. It is possible that the actual value will differ too much from the forecast or the previous one, which will provoke a market reaction. On Wednesday, the index of business activity in the manufacturing sector will be published in Britain, and the ADP report on changes in the number of employees will be published in the United States. The ADP report is one of the most controversial reports. First, it rarely coincides in nature with the Nonfarm Payrolls report, although in theory, they both signal the state of the same sphere - the labor market. Second, the markets react differently to each report every time. Thus, it is quite difficult to predict what will happen when the next ADP report is published. Also, the ISM manufacturing business activity index is scheduled to be published on the third trading day of the week, which is considered a fairly important indicator.


On Thursday, there is nothing in the UK and the US – a speech by FOMC board member Raphael Bostic, as well as a report on applications for unemployment benefits. Mr. Bostic's rhetoric is interesting after the position of Jerome Powell became known. Finally, Friday is the most interesting day of the week. In the US, reports on unemployment, new jobs outside the agricultural sector, and changes in average wages for August will be published. After two consecutive months of Nonfarm Payrolls gaining almost 1 million new jobs, a certain decline should follow. In addition, in recent weeks, there has been an increase in cases of "coronavirus" and its "delta strain" in the United States, so there may be a drop in business activity, economic activity, and the pace of economic recovery and the labor market. Also, on this day, the US ISM services business activity index will be published. It is also a reasonably important report. As a result, we have a fairly large number of various statistics that can affect the pound/dollar pair.


The average volatility of the GBP/USD pair is currently 68 points per day. For the pound/dollar pair, this value is "medium-weak." On Tuesday, August 31, we expect movement inside the channel, limited by the levels of 1.3685 and 1.3821. A reversal of the Heiken Ashi indicator upwards will signal a possible resumption of the upward movement.


Nearest support levels: S1 – 1.3733 S2 – 1.3672 S3 – 1.3611 

Nearest resistance levels: R1 – 1.3794 R2 – 1.3855 R3 – 1.3916


Trading recommendations:


The GBP/USD pair on the 4-hour timeframe is fixed back above the moving average line. Thus, today you should open new buy orders with targets of 1.3794 and 1.3821 after the Heiken Ashi indicator turns up or in the case of a price rebound from the moving average. Sell orders should be considered again in the case of a reverse price consolidation below the moving average line with targets of 1.3685 and 1.3672 and keep them open until the Heiken Ashi turns up.