Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - sideways.
The British pound paired with the US dollar continues to be in a "swing" mode for almost a month. After it became known about the growth of US inflation to 5% yesterday, the quotes of the British pound shot up. However, it remained inside the side channel of 1.4100-1.4220, which they have been for several weeks. Yesterday, however, the quotes briefly fell below 1.4100, even reaching the level of 1.4075. However, what difference does it make if they returned to the usual range after a couple of hours? So, as we expected, nothing changes because of the usual macroeconomic statistics. The pound continues to trade very high and can not even go down a little within the framework of a real correction. In principle, all the same factors work here as for the euro/dollar pair. America continues to pump its economy with trillions of dollars, not giving any opportunity to the US dollar to rise in price even a little. Market participants continue to stay in the longs, as they expect a strong recovery in the British economy and an increase in the key rate of the Bank of England, which has already been discussed several times by representatives of the regulator. The global downward trend for the pound/dollar pair presumably ended last year, so now the pound can wait 6-8 years for growth. Therefore, at this time, no changes in the technical picture can be identified. The main question remains, when will the pair stop trading in the 120-point range and start a new trend movement? However, market participants still ignore the fundamental background from the UK, so even weak pressure on the British currency does not arise.
While the European Union was summing up the results of the next ECB meeting, the UK and the European Union were trying to find a way out of the next "impasse" in which they found themselves after Brexit. This time we are talking about the "Northern Ireland Protocol" and its non-compliance by London. At least, that's what Brussels is accusing them of. Boris Johnson and his government unilaterally extended the grace period of customs and sanitary checks for products from the UK to Northern Ireland. Representatives of the European Commission have already stated that London is obliged to adhere to all the points of the agreement that has already been reached. Otherwise, Brussels will not discuss new agreements with the Kingdom and go to court to resolve the dispute. On Wednesday, the parties met to discuss the protocol on the border of Northern Ireland, which remains in the Customs Union. According to London, it does not work as intended and requires revision. However, Brussels is categorically against the revision of the agreement and demands the unquestioning implementation of all its points. According to Reuters, it was not possible to make progress during the negotiations. The parties stated that there is no breakthrough in the negotiations. However, they also note that the negotiations cannot be called failed either. European Commission Vice-President Maros Sefcovic and David Frost, who previously negotiated a trade deal with Michel Barnier, tried to progress. Sources close to the UK government say that London is ready to unilaterally change some points of the agreement "to prevent a food blockade of Northern Ireland." According to Boris Johnson, the country is already facing a shortage of some groups of goods and medicines due to bureaucracy and the refusal of British suppliers to send their products to the Irish part of the UK, as the new regime at the border greatly complicates the work and minimizes their profits. Some members of the British government believe that the European Union purposefully creates problems under the "Northern Ireland protocol" as if taking revenge on London for Brexit and call on the current government not to indulge in these provocations. In general, the situation is again almost stalemate and smells of possible legal proceedings. It should also be noted that Customs inspections of certain groups of goods at the Northern Ireland border are not the only issue on which the parties disagree. In total, about 30 controversial issues were discussed at the talks. In Northern Ireland itself, they are categorically dissatisfied with the new protocol, as they believe that it causes problems with the supply of all the goods necessary for the country. Also, according to experts, London is very strongly opposed to any proposals from Brussels because of its unwillingness to be dependent on European legislation again. London wants to have full independence from the European Union and build further relations exclusively on beneficial terms. "If the UK continues to take unilateral actions, the EU will not hesitate to respond quickly, firmly, and decisively to ensure that the Kingdom complies with its international obligations," Maros Sefcovic said. David Frost also reminded his European counterpart that London reserves the right to apply article 16 of the protocol, which allows it to resort to unilateral actions in the event of a threat of serious economic and social consequences.
Thus, the tension in relations between Brussels and London remains. However, it does not yet affect the pound in any way. The British currency is now waiting for its statistics, which will be published this morning. Recall that today, the volume of GDP for April, the volume of industrial production for April, as well as the balance of trade balance will be known. The Governor of the Bank of England, Andrew Bailey, will also give a speech today, along with two of his deputies, Sir David Ramsden and Jon Cunliffe. Their speeches can touch on monetary policy, the economic situation of the UK, and its geopolitical problems with the European Union.
The average volatility of the GBP/USD pair is currently 89 points per day. For the pound/dollar pair, this value is "average." On Friday, June 11, we expect movement within the channel, limited by the levels of 1.4076 and 1.4253. A reversal of the Heiken Ashi indicator back downward will signal a new round of downward movement within the "swing."
Nearest support levels:
S1 – 1.4130
S2 – 1.4099
S3 – 1.4069
Nearest resistance levels:
R1 – 1.4160
R2 – 1.4191
R3 – 1.4221
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 1.4191 and 1.4221 until the Heiken Ashi indicator turns down. Sell orders should be opened in the event of a reversal of the Heiken Ashi indicator downwards with a target of 1.4099. The pound now continues to move in an absolute flat, which should be considered when opening any positions.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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