4-hour timeframe
Technical details:
Higher linear regression channel: direction - downward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - upward.
CCI: 164.0385
The British pound continued to move up during the past day and worked out the Murray level of "6/8"-1.2451, which we called the upper line of the side channel. Thus, overcoming this level will increase the probability of resuming the upward trend. We do not believe that the pound now has sufficient motivation to continue strengthening against the dollar. However, we should not forget that the US dollar also did not quite reasonably rise by 1,700 points. The decline began from the level of 1.28. Thus, it is possible to expect a return of the rates to this level. Volatility in the pound continues to decline, which also speaks in favor of calming market participants.
In addition to all the events listed in the article on EUR/USD, on Thursday, April 9, the Fed announced a new program of assistance to the US economy for 2.3 trillion dollars. Earlier, the Fed expanded the quantitative easing program to unlimited values, and also lowered the key rate to 0.25%. After that, the US government adopted its $ 2 trillion economic assistance program. And now a new package that will be aimed at lending to small and medium-sized businesses, as well as to help the authorities of each state. "The Federal Reserve went to additional measures of support, providing another $2.3 trillion in loans. This funding will help households and businesses of any size, as well as strengthen the ability of state authorities to provide essential services during an epidemic," the Fed said in a statement. It is also reported that loans to companies will be provided for 4 years with deferred principal payments and interest for 1 year. However, all this news did not provide any support to the US currency. Do not forget that the currency market is run by traders who can buy or sell a particular currency based on their considerations. Moreover, so far, all the actions of the US government and the Fed do not lead to any mitigation of the fall of the US economy. Almost 17 million people have lost their jobs in three weeks, and this is not the end of it. What will be the data on industrial production, GDP, inflation, retail sales, and orders for long-term goods? So far, the US economy is very much like the "Titanic". Huge, rich, but surprisingly slow and capable of collapsing because of a single iceberg in the form of a "coronavirus". After all, in fact, "coronavirus" is not the most deadly disease on the planet. There are a lot of other diseases from which a much larger number of people die every year. But because of these diseases, no quarantine is declared, and the economy does not stop. So, the American economy now has every chance to collapse because of the usual strain of flu.
On the one hand, the Fed tries to radiate optimism, saying that it will use all available tools to support the economy. This was stated yesterday by the head of the Federal Reserve, Jerome Powell. On the other hand, Powell also hinted that the Fed's options are not unlimited. "We will continue to use the tools decisively and aggressively until we are confident that we are firmly on the path to recovery," Powell said. The Fed Chairman also said that the Regulator will stop using emergency tools when it is fully confident that all private institutions and markets will be able to perform their functions. Jerome Powell himself is worried about rapidly moving unemployment values away from their 50-year lows. "The priority for the Fed is private markets," Powell summed up, "they play a key role in the economy."
Meanwhile, the UK can extend the quarantine until May. It is reported that such measures may be taken since doctors are still not sure when exactly the "peak" of the coronavirus outbreak will occur. The British continue to get infected and continue to die. The total number of deaths already exceeds 7,000. The country's Prime Minister, Boris Johnson, is also still in the hospital. From circles close to Johnson, it is reported that the Prime Minister is getting better, the treatment helps.
On the last trading day of the week, all macroeconomic data is scheduled in the United States. Market participants reacted yesterday to another failed report on unemployment claims, so there are hopes that today's inflation report will also be worked out. According to experts' forecasts, the consumer price index will slow down from 2.3% to 1.6% in annual terms in March. In monthly terms, inflation may lose 0.3%. The core consumer price index, excluding food and energy, is likely to slow from 2.4% to 2.3% y/y. In other words, the decline will be extremely insignificant, and the main indicator of inflation, it turns out, will fall mainly due to oil prices. In any case, lower inflation is a negative factor for the US and the dollar. Thus, today we can again expect a fall in the US currency.
However, traders are no less terrified of the data on the British economy. It is expected that the indicators of industrial production and GDP may collapse in March-April by 10-20%. These are huge numbers. So, no matter how bad the US economy looks, the situation is no better in the Foggy Albion. Therefore, the British currency is unlikely to receive long-term support.
From a technical point of view, the pound/dollar pair continues to be inside the side channel, with the upper limit in the range of 1.2450-1.2470. During the last trading day, the pair did not manage to overcome it confidently. Thus, at the moment, the option of rebounding from this level and resuming the downward movement by 150-200 points is relevant. However, overcoming the Murray level of "6/8" may open the way for the pound to the North. Another question is, how long will the British currency stay in the North? What are the fundamental reasons for strengthening it? We remind you that the topic of Brexit is actually put on pause, but sooner or later it will be removed from it. And then all the problems of the UK caused by the "coronavirus" will be multiplied by the problems associated with the exit from the European Union, which has lasted for more than three years and has every chance to continue for another 2 years if the "transition period" is extended. And the chances of its extension, "thanks" to the pandemic, have grown very much recently...
The average volatility of the GBP/USD pair continues to decline and is currently 158 points. However, the activity of traders on the pound/dollar pair remains quite high. On Friday, April 10, we expect movement within the channel, limited by the levels of 1.2314 and 1.2630. The reversal of the Heiken Ashi indicator downwards signals a turn of the downward movement inside the channel. The absence of a reversal will greatly increase the pound's chances of further growth.
Nearest support levels:
S1 - 1.2329
S2 - 1.2207
S3 - 1.2085
Nearest resistance levels:
R1 - 1.2451
R2 - 1.2573
R3 - 1.2695
Trading recommendations:
The GBP/USD pair on the 4-hour timeframe continues to trade with an upward bias and tries to determine the further direction of movement. A rebound may follow from the upper border of the channel. In this case, you can sell the pound with a target of 1.2200. It is recommended to buy pound with targets of 1.2573 and 1.2630 after fixing the price above the Murray level of "6/8"-1.2451. It is also recommended to open sell positions after the bears overcome the moving average and the level of 1.2329 with the first target level of 1.2207.
