The GBP/USD currency pair managed to keep moving upward on Friday, but as the pair is still in the side channel on the 24-hour TF, it has no bearing on the pound's prospects. But it's tough to ignore the British pound's 400-point increase over the previous two weeks. Sadly, this movement can soon come to an end because the upper channel limit is at the level of 1.2440 and the rise in the value of the pound was too sudden and impulsive. That is unlikely to last for a very long period.
The US published all of the most intriguing reports on Friday. There were only two of them in reality. Contrary to expectations, industrial production fell by 0.2% annually compared to January, while the University of Michigan's consumer mood index unexpectedly dropped from 67 to 63.4. As a result, both reports came out with bad news for the dollar, which helps to explain why the value of the pound has increased. Yet, since these reports cannot be regarded as significant, we think that the pair would have grown even without them. Yes, it is interesting, but not particularly significant.
As a result, the pair is currently moving in perfect harmony with the available technical data. However, a flat is never foreseeable (even if we're talking about a 24-hour TF). Hence, the movements for the following week can be almost anything. Naturally, there are high expectations surrounding the meetings between the Bank of England and the Fed, but we can already predict that there won't be any surprises. Even without the relevant statements made by Andrew Bailey and Jerome Powell, the stances of both central banks are currently pretty obvious. While inflation in both nations is still high, both central banks should keep raising their target interest rates. Rates have been increasing for a while now, so there is no longer talk of rises of 0.5%. Also, the market's 0.25% gain has been planned out for a while.
Everybody receives 0.25%.
We had mentioned that both central banks should now raise interest rates by 0.25%. How will the pound/dollar pair respond to these Central Bank decisions? The emotional response, in our opinion, won't have any impact on the pair's current technical situation. The market is currently anticipating gains of 0.25%. As a result, the current rate for the pair has long considered these choices. And how likely are surprises to occur? Although inflation in the UK is still very high, the Bank of England is unlikely to decide to implement another 0.5% hike. As the most recent inflation report indicated a new acceleration in the fall, the Fed simply does not need to raise the rate at a rate of 0.5%. As a result, the only intriguing thing is what Andrew Bailey and Jerome Powell will say to the market when the decisions are announced.
Given that both central banks are lowering their rate of tightening, a sudden tightening of both leaders' rhetoric is improbable. Powell dared to declare in front of Congress that the key rate hike would last longer and that acceleration might be required. But it is now abundantly evident to everyone that this is unnecessary. It's unclear why the cautious Powell discussed this in front of senators. We may expect even less from Andrew Bailey, who, in general, avoids discussing how the Central Bank will function in the future. There will undoubtedly be a phrase that traders have long memorized regarding excessive inflation and the necessity of continuing to combat it. So, both meetings can progress towards becoming as acceptable as possible. Surprises are possible, but they are only likely to occur 10% of the time or less. The market will undoubtedly "storm" during the hours of results publishing, but it should quickly settle down. In any case, it is unlikely that the market response will be sufficient to allow the pair to exit the side channel on the 24-hour TF. And on the 4-hour time frame, the moving is overcome by the pair every few days. Generally speaking, for the time being, we urge traders to begin by comprehending the flat and the "swing."
Over the previous five trading days, the GBP/USD pair has experienced an average volatility of 121 points. This value is "high" for the dollar/pound exchange rate. As a result, we anticipate movement inside the channel on Monday, March 20, with the levels of 1.2055 and 1.2297 acting as resistance. A new round of downward movement within the "swing" is indicated by the downward reversal of the Heiken Ashi indicator.
Nearest levels of support
S1 – 1.2146
S2 – 1.2085
S3 – 1.2024
Nearest levels of resistance
R1 – 1.2207
R2 – 1.2268
R3 – 1.2329
In the 4-hour time frame, the GBP/USD pair bounced off the moving average and started moving north again. Unless the Heiken Ashi indicator turns down, you can continue holding long positions with targets of 1.2268 and 1.2297. If the price is fixed below the moving average, short positions may be taken with targets of 1.2024 and 1.1963.
Explanations for the illustrations:
Determine the present trend with the use of linear regression channels. The trend is now strong if they are both moving in the same direction.
Moving average line (settings 20.0, smoothed): This indicator identifies the current short-term trend and the trading direction.
Murray levels serve as the starting point for adjustments and movements.
Based on current volatility indicators, volatility levels (red lines) represent the expected price channel in which the pair will trade the following day.
A trend reversal in the opposite direction is imminent when the CCI indicator crosses into the overbought (above +250) or oversold (below -250) zones.