Higher linear regression channel: direction - sideways.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - upward.
The British pound also rose against the US currency on Monday. We have already figured out in the article on the euro/dollar the reasons for the fall of the US currency. However, there are also differences in the movements of the euro/dollar pair and the pound/dollar, which we would once again like to talk about. First, the European currency paired with the US dollar is still more or less decently adjusted in 2021. The correction lasted for three months and amounted to about 38.2% of the entire upward trend. In the case of the British pound, the correction lasted for a month and a half and amounted to 38.2% only from the last round of the upward movement. That is, the pound has adjusted much less than the dollar. Secondly, the pound has grown over the past year much stronger than the euro currency. The pound gained from a low to a high of 27 cents, and the euro – only 17. Of course, this can be attributed to the difference in the volatility of the two main instruments. In part, this is true. Third, the fundamental background in the UK remains very weak, if not a failure. We review the new negative that comes from the Foggy Albion almost several times a week. Even if not all of this news is important and not all of them want to be worked out by market participants, it still cannot be that the entire fundamental background is simply ignored. The pound fell by 27-34 cents in the 4 years when the UK was in the status of implementing Brexit. In 2020, the pair rose by 27 cents without any clear reasons. Yes, there were certain reasons in the United States. At that time, a racist crisis, a political crisis, an economic crisis, and an epidemiological crisis were raging in the United States. Formally, there were fundamental reasons for the dollar sell-off. However, at the same time, there were economic and epidemiological crises in Britain. Thus, it is unlikely that the Black Lives Matter movement and the absurd behavior of Donald Trump were the reasons for the collapse of the American currency in 2020.
Thus, we can only draw the same conclusion as for the euro currency: the pound is falling due to a strong increase in the money supply in the United States, which causes an imbalance in the foreign exchange market, which leads to a depreciation of the dollar. Thus, large, professional, commercial, and non-commercial traders do not even have much to do with what is happening in the market. The dollar becomes cheaper simply because its quantity increases. But in the case of the pound, there is another factor that has a direct impact on the exchange rate formation. This factor is "speculative". For unknown reasons, most traders have decided that it is the pound that deserves to be bought and in no case get rid of it. This market desire is so great that the pound could not even adjust normally against the global upward trend. That is, not only is the money supply in the US growing and will continue to do so in 2021, but also market participants do not want to get rid of the pound. What then remains for the British currency? Just grow. After a formal correction, which was observed in the last month and a half, the pound again shows a serious desire to continue the march to the north. What else can explain the fall in the US dollar since Monday morning, even though no statistics were published, there were no speeches by Jerome Powell or Joe Biden, there was no important news at all.
In technical terms, the movement of the "swing" type is maintained on the 4-hour timeframe for the pound/dollar pair. In principle, it is perfectly visible to the naked eye. We already said in the last article that the pair alternates ascending and descending sections with a length of 250-300 points. At least, that's been the case in recent weeks. Now that the US dollar is ready for a new long-term decline, this type of movement can be leveled, and a more logical type for the trend will appear instead. For example, the standard: impulse growth - correction. However, we recall that at the end of last year, the pound, being in its five-month round of upward movement on the 4-hour timeframe, moved exactly like this - "swinging". Thus, it is possible that even now the global upward trend on the 4-hour timeframe will look like a "swing".
At the end of the article, we would like to remind you that at this time, the fundamental background for the British pound remains as negative as it was before. Economic problems multiply into geopolitical ones and the result is an information mess, the essence of which is simple – everything is not very good in the UK right now and it was not very good in the last 4 years, and it may be even worse in the following years. Of course, Boris Johnson promises the British manna from heaven, but what ruler does not do the same? In fact, over the next two years, Scotland can achieve an independence referendum. The EU, which Edinburgh and most Scots want to return to. The European Union supports the idea of Nicola Sturgeon to return the country to the alliance because it is profitable for it. As it is profitable for Scotland itself. Therefore, the European Union can even exert some pressure on London, and there are plenty of levers. It should be recalled that the trade agreement between London and Brussels looks like a draft in the end. The main provisions are defined in it, however, there are a huge number of issues that are not regulated in any way. As a result, in the first months of the "post-Brexit period" in Britain, there were a lot of claims to the European Union. In the future, they can only become more. Well, the conflict at the acute stage can only flare up more, further aggravating the situation.
The average volatility of the GBP/USD pair is currently 99 points per day. For the pound/dollar pair, this value is "average". On Tuesday, April 20, therefore, we expect movement within the channel, limited by the levels of 1.3887 and 1.4085. A reversal of the Heiken Ashi indicator downwards may signal a round of downward correction.
Nearest support levels:
S1 – 1.3977
S2 – 1.3916
S3 – 1.3855
Nearest resistance levels:
R1 – 1.4038
R2 – 1.4099
R3 – 1.4160
The GBP/USD pair has started a new round of upward movement on the 4-hour timeframe. Thus, today it is recommended to stay in buy orders with targets of 1.4038 and 1.4085 until the Heiken Ashi indicator turns down. Sell orders should be opened in case of overcoming the moving average with a target of 1.3733 and keep them open until the Heiken Ashi indicator turns up.