Overview of the GBP/USD pair. April 8th. US inflation may present a new unpleasant surprise
April 8, 2024 10:22 am
The GBP/USD currency pair also showed illogical and unjustified movements on Friday. It may seem that the downward trend in the pound is still intact, but this is not the case. Just switch to the 24-hour timeframe, where a 4-month flat is clearly visible. Thus, on the 4-hour chart, we observe alternating short-term upward and downward trends. At the moment, the price remains near the lower boundary of the sideways channel – the level of 1.2500. The boundary is approximate. Last week, the pair illogically deviated from the 25th level, ignoring a strong macroeconomic background in the US. And on Friday, it briefly fell, which should not mislead traders. There is a much higher probability of a new upward trend now, and it doesn’t matter if such a movement corresponds to the fundamental background.
Thus, the fundamental background this week will have practically secondary importance. Yes, the US will publish the most important and likely resonant report on inflation, but last week, we saw far more than just one important and resonant report. For example, nonfarm payrolls exceeded forecasts by a minimum of 100 thousand, which was not enough reason for the dollar to rise. Therefore, even if inflation accelerates in March to 3.4% or even higher, the dollar may only appreciate for a short period, and then everything will return to its place. If the market does not want to sell the pound, then no statistics or events will make it change its position. Therefore, the US inflation report is the most important event, but it has practically no significance for the GBP/USD pair.
In the UK, there will be only one interesting day this week. On Friday, reports on industrial production and monthly GDP will be published. Both the first and second reports are unlikely to provoke a reaction of more than a couple of dozen points. The market obviously knows the current state of the British economy. It is well known that GDP has been shrinking for two consecutive quarters and that the country is in a technical recession. The monthly GDP report for February will not change anything and certainly will not prompt the market to suddenly want to get rid of the British pound.
In the US, apart from the inflation report, there will also be very few important events. The FOMC minutes are a mere formality; they rarely provoke a market reaction since all necessary data are provided immediately after the meeting. The University of Michigan Consumer Sentiment Index is not the most significant report. The Producer Price Index is interesting, but even without it, it is clear that inflation in America is rising, not falling. The Fed has no grounds to lower the key rate, even in June. The hawkish stance of the American regulator will remain, and the dollar, as usual, will not benefit from this factor. We believe that the flat is currently key, so to see good movements, the price needs to exit the $1.25–1.28 channel.
The average volatility of the GBP/USD pair over the last 5 trading days is 70 points. For the GBP/USD pair, this value is considered “average.” Therefore, on Monday, April 8th, we expect movement within the range limited by the levels of 1.2564 and 1.2704. The senior linear regression channel is still sideways, so there are no questions about the current trend. The CCI indicator entered oversold territory on Monday, which triggered the pair’s rise. However, the market is trading somewhat illogically anyway, which is not surprising given the ongoing 24-hour flat.
Nearest support levels:
S1 – 1.2634
S2 – 1.2573
S3 – 1.2512
Nearest resistance levels:
R1 – 1.2695
R2 – 1.2756
R3 – 1.2817
Trading recommendations:
The GBP/USD pair continues to trade in a flat on the 24-hour timeframe, which is the most important. We still expect movement to the south with targets at 1.2512 and 1.2482, and the market still reluctantly buys the dollar and sells the pound, often ignoring the fundamental and macroeconomic background. Thus, it is necessary first for the flat to end and then to analyze the technical picture for trading signals on the formation of a new trend. Purchases now are even more logical, as the price once again failed to overcome the lower boundary of the sideways channel. This means it may start moving towards the upper one. There is currently no correlation between the euro and the pound.
Explanation of illustrations:
Linear regression channels – help determine the current trend. If both are directed in the same direction, then the trend is currently strong.
The moving average line (settings 20.0, smoothed) – determines the short-term trend and the direction in which trading should be conducted.
Murray levels – target levels for movements and corrections.
Volatility levels (red lines) – the likely price channel in which the pair will spend the next day, based on current volatility indicators.
CCI indicator – its entry into oversold territory (below -250) or overbought territory (above +250) means that a trend reversal in the opposite direction is approaching.
The material has been provided by InstaForex Company – www.instaforex.com
The GBP/USD currency pair also showed illogical and unjustified movements on Friday. It may seem that the downward trend in the pound is still intact, but this is not the case. Just switch to the 24-hour timeframe, where a 4-month flat is clearly visible. Thus, on the 4-hour chart, we observe alternating short-term upward and downward trends. At the moment, the price remains near the lower boundary of the sideways channel – the level of 1.2500. The boundary is approximate. Last week, the pair illogically deviated from the 25th level, ignoring a strong macroeconomic background in the US. And on Friday, it briefly fell, which should not mislead traders. There is a much higher probability of a new upward trend now, and it doesn’t matter if such a movement corresponds to the fundamental background.
Thus, the fundamental background this week will have practically secondary importance. Yes, the US will publish the most important and likely resonant report on inflation, but last week, we saw far more than just one important and resonant report. For example, nonfarm payrolls exceeded forecasts by a minimum of 100 thousand, which was not enough reason for the dollar to rise. Therefore, even if inflation accelerates in March to 3.4% or even higher, the dollar may only appreciate for a short period, and then everything will return to its place. If the market does not want to sell the pound, then no statistics or events will make it change its position. Therefore, the US inflation report is the most important event, but it has practically no significance for the GBP/USD pair.
In the UK, there will be only one interesting day this week. On Friday, reports on industrial production and monthly GDP will be published. Both the first and second reports are unlikely to provoke a reaction of more than a couple of dozen points. The market obviously knows the current state of the British economy. It is well known that GDP has been shrinking for two consecutive quarters and that the country is in a technical recession. The monthly GDP report for February will not change anything and certainly will not prompt the market to suddenly want to get rid of the British pound.
In the US, apart from the inflation report, there will also be very few important events. The FOMC minutes are a mere formality; they rarely provoke a market reaction since all necessary data are provided immediately after the meeting. The University of Michigan Consumer Sentiment Index is not the most significant report. The Producer Price Index is interesting, but even without it, it is clear that inflation in America is rising, not falling. The Fed has no grounds to lower the key rate, even in June. The hawkish stance of the American regulator will remain, and the dollar, as usual, will not benefit from this factor. We believe that the flat is currently key, so to see good movements, the price needs to exit the $1.25–1.28 channel.
The average volatility of the GBP/USD pair over the last 5 trading days is 70 points. For the GBP/USD pair, this value is considered “average.” Therefore, on Monday, April 8th, we expect movement within the range limited by the levels of 1.2564 and 1.2704. The senior linear regression channel is still sideways, so there are no questions about the current trend. The CCI indicator entered oversold territory on Monday, which triggered the pair’s rise. However, the market is trading somewhat illogically anyway, which is not surprising given the ongoing 24-hour flat.
Nearest support levels:
S1 – 1.2634
S2 – 1.2573
S3 – 1.2512
Nearest resistance levels:
R1 – 1.2695
R2 – 1.2756
R3 – 1.2817
Trading recommendations:
The GBP/USD pair continues to trade in a flat on the 24-hour timeframe, which is the most important. We still expect movement to the south with targets at 1.2512 and 1.2482, and the market still reluctantly buys the dollar and sells the pound, often ignoring the fundamental and macroeconomic background. Thus, it is necessary first for the flat to end and then to analyze the technical picture for trading signals on the formation of a new trend. Purchases now are even more logical, as the price once again failed to overcome the lower boundary of the sideways channel. This means it may start moving towards the upper one. There is currently no correlation between the euro and the pound.
Explanation of illustrations:
Linear regression channels – help determine the current trend. If both are directed in the same direction, then the trend is currently strong.
The moving average line (settings 20.0, smoothed) – determines the short-term trend and the direction in which trading should be conducted.
Murray levels – target levels for movements and corrections.
Volatility levels (red lines) – the likely price channel in which the pair will spend the next day, based on current volatility indicators.
CCI indicator – its entry into oversold territory (below -250) or overbought territory (above +250) means that a trend reversal in the opposite direction is approaching.
The material has been provided by InstaForex Company – www.instaforex.com
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