Senior channel of linear regression: upward direction
Junior channel of linear regression: sideways direction
Moving average (20; smoothed) - sideways direction
In recent days, the British pound has been moving without any logic. Because of this, we believe that the current period should be waited out, trying not to take any risks.
To begin with, the volatility of the GBP / USD pair fell to 69 points per day, which is extremely low for this instrument. Secondly, there is no flat, but a vague upward movement instead, which is unlikely to lead to the formation of an upward trend. One gets the impression that the market has lost "ground" and does not understand where it should start making trading decisions now. In addition, the macroeconomic statistics of UK continue to be not just frustrating, but disastrous as well. The key indicators of the economy such as inflation, GDP and industrial production were extremely weak. Traders also have to solve a dilemma, as it will not be possible to constantly sell the same currency. Because of this, the pound gets such temporary respites, which are not fundamentally justified in any way.
On the last trading day of the week, UK will publish a report on retail sales for December. Unlike the retail sales in the US, Albion is expected to grow by as much as 0.7% m / m, as well as 2.6% y / y. However, do not let such high numbers mislead traders. A month earlier, retail sales decreased by 0.6%. A month before that, there was an increase of 0%, a month before, a decrease of 0.1%, and a month earlier, a drop of 0.4%. Thus, after 4 consecutive failed months, one month with an increase does not indicate any positive trend. Moreover, the forecast of + 0.6% still needs to be justified, and any value below + 0.6% m / m will be considered by traders as not high enough.
Meanwhile, in the US, in addition to the report on industrial production, the consumer confidence index from the University of Michigan will be published today. This may be a neutral forecast, but it holds a high value for market participants. Because of this, the pound, in the first half of the day, should be dependent on retail sales, and in the second, on statistics from overseas. It "should", but there's no guarantee that it will. Given the illogical nature of the current movement, we can assume that the reaction of traders will simply not follow today's reports. Despite the consolidation of the pair's quotes above the moving average, we do not believe that there is a sufficient number of chances for a serious upward movement.
In the current situation, how can we not once again pay attention to the fact that at the end of the month, there will be a regular meeting of the Bank of England, where members of the monetary committee will again have to solve a serious question : lower the rate immediately, or look back at Brexit, which will take place the next day, and for fear of negative consequences, save such a serious tool in case of emergency? We believe that the probability of lowering the key rate at the next meeting is low, solely due to the fact that Brexit, at the time of January 30, has not yet begun. From the point of view of macroeconomic statistics, the rate should have been lowered a couple of months ago but the head of the Central bank, Mark Carney, and the company did not take this step. At the same time, the January meeting will be Carney's last, where he can finally go on easing the monetary policy. Basically, the next meeting of the British Parliament will be extremely interesting.
From a technical point of view, a new upward trend is emerging, however, as we said above, the upward movement is weak, uncertain, and groundless. Thus, it is difficult to imagine what can be expected from the pound now, and whether market participants will react to today's macroeconomic statistics.
The average volatility of the GBP/USD pair over the past 5 days is 69 points, and continues to decline. According to the current level of volatility, the working channel on January 17 is limited to the levels of 1.3005 and 1.3143, but the movement is now weak and flat, so it is unlikely that any of the borders will be worked out today.
Nearest support levels:
S3 – 1.3000
Nearest resistance levels:
R1 – 1.3092
R2 – 1.3123
R3 – 1.3153
The GBP / USD pair continues a weak upward movement, so traders are advised to wait for the price to reverse below the moving average, and sell the pound again with the goals of 1.3000 and 1.2970. You can formally buy the British currency now with the first goal of 1.3123, but it should be remembered that the fundamental background is not on the side of the pound.
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 senior channel of linear regression is the blue lines of unidirectional movement.
The Junior channel of the linear regression is the purple lines of unidirectional movement.
CCI – blue line in the indicator regression window.
Moving average (20;smoothed) – blue line on the price chart.
Murray levels – multi-colored horizontal stripes.
Haiken ASHI is the indicator with colors bars in blue or purple.
Possible variants of the price movement: Red and green arrows.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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