The pound-dollar pair still cannot determine the direction of its movement. Literally every trading day, the pair experiences local "ups and downs", while remaining within the 100-point range. Bears cannot move below 1.4090, GBP/USD bulls similarly cannot settle in the area of the 42nd figure. As a result, traders are forced to trade within the 41st price level, occasionally exceeding its boundaries.
Today is no exception. Thursday morning, the pound fell to the lower border of the aforementioned price band, marking 1.4088. But at the beginning of the US session, the pair renewed its two-day high, getting close to the borders of the 42nd figure. Such volatility was provoked by several fundamental factors at once, the inconsistency of which does not make it possible for the bears to develop the downward momentum. However, conflicting signals did not enable the bulls to consolidate their success by testing the level of 1.4200.
It all started with the fact that former chief adviser to Boris Johnson, Dominic Cummings, made several high-profile statements about the mistakes made by the British government at the height of the epidemiological crisis. In particular, he criticized the actions of the prime minister to combat the pandemic. According to him, the "frivolous" attitude towards covid in February last year, the "belated" decision to introduce quarantine and the lack of coordination in the government led to tragic consequences. Cummings noted that, in his opinion, many deaths could have been avoided if the head of government had responded to the situation in time. In addition, the ex-adviser claims that Johnson did say that he would have preferred the "mountain of corpses" to the next lockdown.
It should be recalled here that a political scandal broke out in the UK exactly a month ago, which also affected the GBP/USD pair. So, according to the BBC, in the fall of 2020, when the government was discussing the possible introduction of another lockdown in the country, Prime Minister Boris Johnson strongly opposed this measure and at the same time uttered the phrase "it is better to let a pile of thousands of bodies grow." After this information began to be circulated by the British media, the pound temporarily suspended its growth - including in tandem with the dollar. And today the British currency did the same, plunging into the 40th figure area.
On the wave of "political revelations" by Dominic Cummings, the pair dropped to the lower border of the established range of 1.4090-1.4200. The pound began to enjoy active demand in this price area. The beats took profits, not counting on a succeeding decline, while the bulls opened long positions expecting a "traditional" return to the upper border of the price band. As a result, the pair really returned to the borders of the 42nd price level, as if justifying the hopes of the GBP/USD bulls.
Conflicting US macroeconomic reports also helped buyers regain their lost ground. So, today the second estimate of the US GDP growth for the first quarter was published. According to general forecasts, the key indicator should have come out at around 6.5%, while the original estimate was at 6.4%. But in reality the indicator remained at the same level. In addition, the greenback actually ignored the rather weak release of data on the growth in the number of orders for durable goods. The indicator significantly fell short of the forecast level - instead of the expected growth to 0.8%, the indicator returned to the negative area, sagging to -1.3% (the worst result since April last year). As a counterbalance, the weekly indicator of the increase in initial applications for unemployment benefits was used. The indicator has been consistently declining for the fourth week in a row (that is, throughout May). If at the end of April this figure was at the level of 590 thousand, today it came out at around 406 thousand.
Thus, the fundamental picture allows traders to continue to trade in the 1.4090-1.4200 range. As for the pair, a situation has developed in which "they cannot go down, but they don't want to go up". The dollar's weak positions does not make it possible for the bears to develop a large-scale downward movement, while the contradictory rhetoric of the representatives of the Bank of England does not allow the GBP/USD bulls to settle in the area of the 42nd figure. Let me remind you that, speaking recently in the British Parliament, the members of the British regulator, on the one hand, ascertained the recovery of the national economy, but at the same time admitted that this recovery "is not balanced." At the same time, representatives of the Bank of England did not sound clear signals regarding the curtailment or prolongation/increase of QE.
Taking into account the prevailing fundamental background, when approaching the lower border of the aforementioned range, you can consider long positions, and when approaching the upper border, respectively, short positions, to the bottom of the 41st figure.
