4-hour timeframe
Technical data:
The upper channel of linear regression: direction - up.
The lower channel of linear regression: direction - up.
The moving average (20; smoothed) - down.
CCI: -78.4896
The British pound, after a minimal correction on Friday, resumed its downward movement. Thus, although the current week has the status of "semi-holiday and festive", we believe that the British currency may well continue its decline. We have listed several times all the reasons that will push the pair down in the medium and long term, and they have not changed at all. The most important among them is that the pound rose to the level of 1.3500 quite unreasonably when there were practically no reasons and macroeconomic grounds for this. Now we see just a return of prices to fair levels. Traders have already managed to lower the pair to the level of 1.3000, and we believe that this is not the limit of the fall of the pound/dollar quotes.
As for the fundamental background, this week from the UK there will not be a single significant publication. Thus, with today's report on orders for long-term goods in America, everything will begin and end with the same report. Based on the fact that important macroeconomic reports are not scheduled for this week, the volatility of the pair may significantly decrease. Traders will have to pay close attention to technical factors and the political background that continues to excite the minds of traders in both the US and the UK.
All the problems that exist now in the United States seem to be not a problem. Even if the almost impossible happens and Donald Trump is impeached by the US Senate, how will it affect the country's economy? That's right, almost nothing. That is, a sufficiently resonant topic from a political point of view, from an economic point of view - is practically useless. There will come a new president who will either continue the course of Trump or smoothly turn the nose of the huge country in the other direction. One way or another, the country's macroeconomic indicators will not be affected by such an event. Trade war with China? It has been going on for more than a year, and during all this time it is quite difficult to say that the US dollar has become cheaper because of this reason.
It's different in the UK. Here, almost any political perturbation has a huge potential impact on Brexit, which in turn has a huge impact on the country's macroeconomic indicators, which have been falling for a long time without Brexit. Thus, any political crisis or event can cause a change in the state of the country's economy. Usually for the worse. That is why we believe that Boris Johnson's policy can be effective in everything related to Brexit (the Prime Minister managed to get the approval of Parliament), but he pays very little attention to economic issues. That is why we expect the UK economic situation to continue to deteriorate both before Brexit and during the "transition period" and after Brexit. And in the future, by the way, now everything will depend only on Boris Johnson since he is now almost single-handedly ruling the country. He will have to negotiate with Brussels and, according to many experts and political analysts, he will not succeed in these negotiations. Boris Johnson himself assured the people of Great Britain that he would do everything necessary to avoid leaving the European Union without an agreement. It is hard to say how much the Prime Minister will keep his words this time.
At the beginning of a new trading week, the pound/dollar pair shows a certain desire to move to a correction, but the fall in quotes can resume at any time. So far, only the rebound from Murray's level of "1/8" - 1.3000 speaks in favor of the correction, plus this is a fairly important psychological level. The downward trend of the GBP/USD pair will continue as long as the price is below the moving average line.
The average volatility of the pound/dollar pair over the past 5 days is 132 points, remaining at a high level. However, among these 5 days, there are days in which volatility was abnormally high, so we take now the average volatility for 30 days, and according to this, the working volatility channel for December 23 is limited to the levels of 1.2904 and 1.3096. All "fast" technical indicators continue to indicate a downward movement, so the short-term downward trend remains. Linear regression channels may start to turn down soon.
Nearest support levels:
S1 - 1.3000
S2 - 1.2939
S3 - 1.2878
Nearest resistance levels:
R1 - 1.3062
R2 - 1.3123
R3 - 1.3184
Trading recommendations:
The GBP/USD pair continues its downward movement. Thus, traders are advised to remain in the sales of the British currency with the nearest targets of 1.2939 and 1.2904 until the Heiken Ashi indicator turns upwards, which signals the beginning of a correction. It is recommended to return to the purchases of the pound/dollar pair not earlier than the reverse consolidation above the moving average line with the first targets of 1.3184 and 1.3245.
In addition to the technical picture, fundamental data and the time of their release should also be taken into account.
Explanation of the illustrations:
The upper channel of linear regression - the blue line of the unidirectional movement.
The lower channel of linear regression - the purple line of the unidirectional movement.
CCI - the blue line in the regression window of the indicator.
The moving average (20; smoothed) - the blue line on the price chart.
Support and resistance - the red horizontal lines.
Heiken Ashi - an indicator that colors bars in blue or purple.
Possible variants of the price movement:
Red and green arrows.