4-hour timeframe
Technical data:
The upper channel of linear regression: direction - upward.
The lower channel of linear regression: direction - sideways.
The moving average (20; smoothed) - down.
CCI: -78.0874
The British pound, as well as the euro, resumed its downward movement, breaking the moving average line again. Although both macroeconomic reports that were published on Friday in the United States were weak, traders found grounds for new sales of the pound-dollar currency pair. And these grounds do not need to be searched for a long time. They're still the same - the weakest fundamental background from the UK, the failed macroeconomic statistics, and uncertainty about the trade deal with the European Union. On Friday, the report on retail sales in Britain showed a decrease in volumes by 0.6% m/m and an increase of only 0.9% y/y (the forecast was +2.6% y/y). Thus, from the very morning, the pound began to feel the pressure. In general, we believe that the downward movement will continue, as we still do not see any reason for the strengthening of the pound. In the article on the euro currency, we drew the attention of traders to weak industrial production in the States, which may cause other indicators to fall in the coming months, but in the UK, all macroeconomic indicators are already falling and will continue to fall. Therefore, the balance of power remains in favor of the dollar.
Also, we would like to remind you that the UK continues to lose money due to Brexit, which will only start on January 31. Throughout 2020, experts estimate that Britain will lose another $70 billion. Meanwhile, British Finance Minister Sajid Javid advised British businesses to get used to the new realities (that is, life outside the European Union) as quickly as possible. According to Javid, after the UK leaves the European Union, no trade agreements will remain, and entrepreneurs had three years to adjust to the new trade relations. "There will be no alignment of legislation, London will not adhere to EU rules. We will stop being part of the single market and will not be members of the Customs Union. All this will happen before the end of this year," Sajid Javid said. At the same time, Javid himself is optimistic about the future and believes that after the "divorce" from the EU, British companies will prosper. Companies can and will "thrive", but when will this happen? So far, one thing can be said: the Finance Minister is unlikely to say that Brexit will have a killer effect on the country's economy, and business will suffer huge losses. Thus, Javid's comments look like a means to calm the markets, which works very poorly. However, he is right about one thing: the UK and business will really have to live under the new rules now, and given Boris Johnson's position in trade negotiations with the EU, the probability of agreeing with the EU does not exceed 40% now.
No macroeconomic publications are scheduled for the first trading day of the week in the United States and the United Kingdom. Therefore, today I expect quiet trading without sudden movements. Given the fact that we have been waiting for a strong fall in the pound for a long time, the pound-dollar currency pair may continue to move down today. At the same time, the option with the correction cannot be completely dismissed. However, in any case, as long as the pair is below the moving average line, the sales of the pound are relevant.
The average volatility of the pound-dollar pair over the past 5 days is 81 points. According to the current level of volatility, the working channel on January 20 is limited to the levels of 1.2923 and 1.3085, and we believe that the pair will again strive for the lower border of this channel. The reversal of the Heiken Ashi indicator will indicate a round of corrective movement.
Nearest support levels:
S1 - 1.2970
S2 - 1.2939
S3 - 1.2909
Nearest resistance levels:
R1 - 1.3000
R2 - 1.3031
R3 - 1.3062
Trading recommendations:
The GBP/USD pair resumed its downward movement. Thus, traders are advised to sell the pound again with targets of 1.2970 and 1.2939 before the Heiken Ashi turns up. It is not recommended to buy the British currency now, as the pair is located below the moving average, and the bulls remain extremely weak.
In addition to the technical picture, you should also take into account the fundamental data and the time of their release.
Explanation of the illustrations:
The upper channel of linear regression - the blue lines of the unidirectional movement.
The lower channel of linear regression - the purple lines of the unidirectional movement.
CCI - the blue line in the indicator regression window.
The moving average (20; smoothed) - the blue line on the price chart.
Murray levels - multi-colored horizontal stripes.
Heiken Ashi - an indicator that colors bars in blue or purple.
Possible variants of the price movement:
Red and green arrows.
