4-hour timeframe
Technical details:
- Higher linear regression channel: direction – upward.
- Lower linear regression channel: direction – upward.
- Moving average (20; smoothed) – upward.
- CCI: 262.6622
The British pound, following the European currency, also resumed its upward movement on Tuesday, August 18, and managed to overcome the Murray level of “8/8” – 1.3184, from which it previously bounced several times. Thus, after several weeks of “trampling” in one place, we can state: the bulls again dominate the market, and the US dollar remains extremely weak.
We did not see a normal correction for the pound/dollar pair, and the British currency remains very overbought because of this, which, by the way, is signaled by the CCI indicator, whose value now exceeds 250. And again, it is absolutely impossible to say that the reasons for the pair’s growth lie in the strength of the British currency or the UK economy. Or in the positive news from the Foggy Albion. The euro currency and the pound are growing against the dollar almost synchronously, so the reasons should be found in the States.
However, nothing extraordinary is happening in the States right now. It’s just still bad.
1) The situation with “coronavirus” has changed a little for the better. For example, only 35,000 new cases of the disease were registered yesterday, and this value is falling from day to day. Thus, we can not say that the new fall in the US currency is associated with the COVID-2019 epidemic.
2) No macroeconomic statistics were published on Tuesday, so traders could not react to any bad report. However, we are forced to state that the economy’s fall in the second quarter by 33% will be “reflected” in the US currency for a long time.
3) The situation with rallies and protests against the background of a racist scandal has also improved slightly. At least in most cities, popular riots have stopped.
4) The situation with China continues to deteriorate, but, thank God, at a fairly low rate, so there is reason to hope that with the change of power in the country (which is very likely), relations between Beijing and Washington will still improve a little.
5) The only thing that doesn’t improve over time is the political crisis. And it’s really bad here. Biden and Trump continue to pour mud on each other, sociological research suggests that Americans who support Biden are actually just against Trump. And we have already witnessed similar votes, when voters cast their votes not on the principle of “we choose their political program”, but in order to solve certain issues (the parliamentary elections in the UK in December last year, when people voted not for the conservatives and Johnson, but for an early exit from the EU, which the conservatives and Johnson promised).
As a result of such elections, not the best candidate usually comes to power. If, as in our case, there are only two candidates and one of them is obviously bad (in the opinion of the Americans themselves), then it seems that we will really have to choose the one who is less bad. And this role is perfect for Joe Biden, who just don’t have time to remember during the Vice-presidency of Barack Obama, in recent months, when he was the main candidate of the Democratic party.
But Donald Trump continues to conflict with Beijing and Chinese companies. Not so long ago, Washington imposed new sanctions against the Chinese technology giant Huawei. Recall that the US war with this company has been waged for several years. The American side accuses it and the equipment it produces of espionage. Donald Trump called the Chinese company a “disaster” that “did whatever it wanted on US territory”. China, however, responds to any US sanctions very quickly and with mirror measures.
This time Chinese Foreign Ministry spokesman Zhao Lijian said: “Recently, America, without any evidence, under the pretext of protecting national security, has taken various restrictive measures against Huawei and other Chinese companies. This is undisguised hegemonic behavior.” According to the Chinese Foreign Ministry, Washington undermines the principles of fair competition, and China strongly protests such actions against China and its companies.
At this time, the UK began another round of negotiations with Brussels on a comprehensive trade agreement. Many experts no longer believe that the parties will be able to reach an agreement, but the parties themselves continue to hold negotiations and continue to hope for a successful outcome.
It is reported that this evening, Michel Barnier and David Frost will meet for dinner, and tomorrow the work of their negotiating groups will begin. Thus, this week it will be known whether the parties will make progress in the negotiations and whether there will be hope for the conclusion of a final agreement.
The consumer price index for July is scheduled to be published on the third trading day of the week in the UK. This is a fairly important indicator, but unfortunately, traders can ignore it. First, the British pound, as we can see, does not need any reasons to continue growing against the dollar. Yes, the pair stood in one place for a few weeks, but then it resumed growth quite easily. Thus, even weak inflation is unlikely to significantly spoil the mood of traders who have completely forgotten about all the problems of the British economy. The evening publication of the minutes of the US Federal Open Market Committee meeting is likely to have even less chance to influence the movement of the currency pair.
Thus, we believe that on Wednesday, August 18, technical factors will remain in the first place. We recommend continuing to trade the pound/dollar pair in accordance with the indications and signals of the “linear regression channels” system. For example, at the time of writing, both linear regression channels are directed upwards, as is the moving average line, and the Heiken Ashi indicator turns the bars purple, which also indicates a local upward movement. With such indicators, there is nothing left but to trade for an increase.
The average volatility of the GBP/USD pair is currently 90 points per day. For the pound/dollar pair, this value is “average”. On Wednesday, August 19, thus, we expect movement within the channel, limited by the levels of 1.3150 and 1.3330. Turning the Heiken Ashi indicator downward will indicate a round of corrective movement.
Nearest support levels:
- S1 – 1.3214
- S2 – 1.3184
- S3 – 1.3153
Nearest resistance levels:
R1 – 1.3245
Trading recommendations:
The GBP/USD pair resumed its upward trend on the 4-hour timeframe. Thus, today it is recommended to stay in the longs with the goals of 1.3245 and 1.3330 until the Heiken Ashi indicator turns downward. It is recommended to consider sell orders not before fixing the price below the moving average. At the moment, the price is extremely far from this line, so the trend is not expected to change in the near future.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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