GBP/USD. Overview for April 6. The pound is in no rush to decline, even when the market is “bearish”
April 6, 2023 1:22 pm
The GBP/USD currency pair also began to adjust on Wednesday, but as a result, the pound’s volatility was even lower than the euro. This is a peculiar time since yesterday’s most significant data came from overseas, and the pound is often more volatile than the euro. Hence, according to logic, the pound should have adjusted more strongly than the euro yesterday. In contrast, we observed a weaker decline. Remember that the decline occurred when the market had specific reasons to purchase the pair. Yet, as we’ve already stated, there is practically no logic in the movements now, so it’s no surprise if we occasionally observe truly strange movements.
Throughout the first half of the week, the pound had no incentive to increase. In addition, it reached the upper limit of the side channel on the 24-hour TF (that is, it rose by 600 points after rebounding from the lower limit) but also beyond this level (1.2440). We merely stay quiet regarding the fundamentals. On Tuesday, Silvana Tenreyro (Bank of England) expressed an openly “dovish” stance, but no significant news or events occurred on Monday. Remember that this week’s second assessment of business activity indices will be released, so traders were previously prepared for specific indicator levels. Despite no fundamental support over the previous three weeks, the pound has not fallen below the moving average even once.
On the 24-hour TF, the pair’s rise above the side channel is seen. This channel can still be regarded as relevant. Many instances have occurred on the market in which the price has marginally surpassed one or more levels before resuming its primary trend. Thus, we believe the pound’s decline might commence at any moment. Yet, through its look and behavior, the market demonstrates that it is only willing to buy. If there is virtually no macroeconomic context today, there will be a lot of relevant information tomorrow. And the market is likely to interpret these as favorable for the pound, even if this is false.
This article may finish there as well. Why examine the underlying basis today if the market does not consider it? You can list every piece of news about the financial crisis, the economy, and monetary policy, but how do they affect the movement of the pair? We have already stated that increased market expectations for ECB and BA rates in 2023 explain the dollar’s decline. Nevertheless, how much more will the euro and the pound appreciate due to rate hikes in Britain and the EU that are around 0.5% greater than in the United States? No one believes that the Bank of England and the European Central Bank will raise interest rates by 1.5% or 2%.
In addition, we recall that neither the euro nor the pound could regularly adjust following a strong increase in the second half of 2022. The UK and the EU economies are on the edge of recession. And even if the recession does not begin, as Christine Lagarde, Andrew Bailey, and other central bank representatives have frequently stated, inflation is actively reducing in the United States while the economy is rising by 3-4% per quarter. Andrew Bailey anticipates that inflation will decline to 2.9% by the end of the year in Britain, where it is not reducing at all. Even a single economic factor should be sufficient to support the dollar. So, in the near future, it will be required to trade with extreme caution. Even if you believe that the pair should rise now, it is still possible that it will decline within the next several hours. Even though the macroeconomic context is explicit, this does not rule out a movement in the opposite direction.
For the last five trading days, the average GBP/USD pair volatility was 110 points. This value for the pound/dollar pair is high. Thus, we anticipate interchannel movement on Thursday, April 6, limited by the 1.2332 and 1.2552. The Heiken Ashi indicator’s upward reversal will signify the resumption of the upward trend.
Nearest support levels:
S1 – 1.2451;
S2 – 1.2390;
S3 – 1.2329.
Nearest resistance levels:
R1 – 1.2512;
R2 – 1.2573;
R3 – 1.2634.
Trading Recommendations:
In the 4-hour timeframe, the GBP/USD pair has begun a slight decline. Currently, we can consider new long positions with targets of 1.2512 and 1.2552 if the Heiken Ashi indicator reverses upward. If the price settles below the moving average, short positions can be considered with targets of 1.2329 and 1.2268.
Explanations for the illustrations:
Channels of linear regression – aid in determining the present trend. The current trend is strong if both are moving in the same direction.
Moving average line (settings 20.0, smoothed) – determines the current short-term trend and trading direction;
Murray Levels – movement and correction target levels;
Volatility levels (red lines) represent the price channel in which the pair is anticipated to trade tomorrow based on current volatility indicators.
The CCI indicator — its entry into the oversold area (below -250) or the overbought area (above +250) indicates that a trend reversal is imminent.
The material has been provided by InstaForex Company – www.instaforex.com
The GBP/USD currency pair also began to adjust on Wednesday, but as a result, the pound’s volatility was even lower than the euro. This is a peculiar time since yesterday’s most significant data came from overseas, and the pound is often more volatile than the euro. Hence, according to logic, the pound should have adjusted more strongly than the euro yesterday. In contrast, we observed a weaker decline. Remember that the decline occurred when the market had specific reasons to purchase the pair. Yet, as we’ve already stated, there is practically no logic in the movements now, so it’s no surprise if we occasionally observe truly strange movements.
Throughout the first half of the week, the pound had no incentive to increase. In addition, it reached the upper limit of the side channel on the 24-hour TF (that is, it rose by 600 points after rebounding from the lower limit) but also beyond this level (1.2440). We merely stay quiet regarding the fundamentals. On Tuesday, Silvana Tenreyro (Bank of England) expressed an openly “dovish” stance, but no significant news or events occurred on Monday. Remember that this week’s second assessment of business activity indices will be released, so traders were previously prepared for specific indicator levels. Despite no fundamental support over the previous three weeks, the pound has not fallen below the moving average even once.
On the 24-hour TF, the pair’s rise above the side channel is seen. This channel can still be regarded as relevant. Many instances have occurred on the market in which the price has marginally surpassed one or more levels before resuming its primary trend. Thus, we believe the pound’s decline might commence at any moment. Yet, through its look and behavior, the market demonstrates that it is only willing to buy. If there is virtually no macroeconomic context today, there will be a lot of relevant information tomorrow. And the market is likely to interpret these as favorable for the pound, even if this is false.
This article may finish there as well. Why examine the underlying basis today if the market does not consider it? You can list every piece of news about the financial crisis, the economy, and monetary policy, but how do they affect the movement of the pair? We have already stated that increased market expectations for ECB and BA rates in 2023 explain the dollar’s decline. Nevertheless, how much more will the euro and the pound appreciate due to rate hikes in Britain and the EU that are around 0.5% greater than in the United States? No one believes that the Bank of England and the European Central Bank will raise interest rates by 1.5% or 2%.
In addition, we recall that neither the euro nor the pound could regularly adjust following a strong increase in the second half of 2022. The UK and the EU economies are on the edge of recession. And even if the recession does not begin, as Christine Lagarde, Andrew Bailey, and other central bank representatives have frequently stated, inflation is actively reducing in the United States while the economy is rising by 3-4% per quarter. Andrew Bailey anticipates that inflation will decline to 2.9% by the end of the year in Britain, where it is not reducing at all. Even a single economic factor should be sufficient to support the dollar. So, in the near future, it will be required to trade with extreme caution. Even if you believe that the pair should rise now, it is still possible that it will decline within the next several hours. Even though the macroeconomic context is explicit, this does not rule out a movement in the opposite direction.
For the last five trading days, the average GBP/USD pair volatility was 110 points. This value for the pound/dollar pair is high. Thus, we anticipate interchannel movement on Thursday, April 6, limited by the 1.2332 and 1.2552. The Heiken Ashi indicator’s upward reversal will signify the resumption of the upward trend.
Nearest support levels:
S1 – 1.2451;
S2 – 1.2390;
S3 – 1.2329.
Nearest resistance levels:
R1 – 1.2512;
R2 – 1.2573;
R3 – 1.2634.
Trading Recommendations:
In the 4-hour timeframe, the GBP/USD pair has begun a slight decline. Currently, we can consider new long positions with targets of 1.2512 and 1.2552 if the Heiken Ashi indicator reverses upward. If the price settles below the moving average, short positions can be considered with targets of 1.2329 and 1.2268.
Explanations for the illustrations:
Channels of linear regression – aid in determining the present trend. The current trend is strong if both are moving in the same direction.
Moving average line (settings 20.0, smoothed) – determines the current short-term trend and trading direction;
Murray Levels – movement and correction target levels;
Volatility levels (red lines) represent the price channel in which the pair is anticipated to trade tomorrow based on current volatility indicators.
The CCI indicator — its entry into the oversold area (below -250) or the overbought area (above +250) indicates that a trend reversal is imminent.
The material has been provided by InstaForex Company – www.instaforex.com
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