4-hour timeframe
Technical data:
The upper channel of linear regression: direction - upward.
The lower channel of linear regression: direction - downward.
The moving average (20; smoothed) - down.
CCI: -9.1421
The British pound began to adjust again yesterday and completely ignored the report on inflation in the United States. We still believe that if the euro should move south, then the pound - even more so. Nevertheless, around the psychologically important mark of $ 1.30, the bears lost their positions and stopped selling the British currency. However, there is one factor that can continue to regularly put pressure on the pound. This factor is macroeconomic statistics from the UK. We don't even remember the last time economic data from Albion was really strong and showed improvements in the Kingdom's economy. In recent months, statistics have been either neutral or failed. Thus, we believe that sooner or later, the downward trend will resume, as it simply cannot be otherwise, at least from a fundamental point of view. As before, we recommend waiting for the time (for selling the pound-dollar pair) when both the fundamental background and the indicator readings will match.
Today, traders will have another opportunity to see the state of the UK economy. British inflation data for December will be published today. According to experts' forecasts, inflation in December will remain unchanged at 1.5% y/y. First, this is a rather weak value. Second, there is no acceleration. Lastly, inflation in the United States is much stronger. Thus, not exceeding the forecast value may trigger a new round of sales of the British currency, not to mention a weaker value. Every month, an increase of about 0.2% is expected.
Meanwhile, all processes related to Brexit are on pause again. In principle, now we can only wait until January 31 when the UK will enter the "transition period" and begin to reap the first fruits of the termination of ties with the Alliance. We believe that the economic situation in the country may deteriorate further over the next 11 months, as it will now be possible to talk about the beginning of Brexit, rather than preparing for it. Meanwhile, Prime Minister Boris Johnson, with all his looks and actions, continues to show how important "divorce" is to him for the European Union, how important it is for him to have his name and surname next to the word "Brexit" in historical textbooks and books. According to a new idea by Johnson, London's Big Ben should break through and mark the UK's exit from the European Union at 23:00 on January 31. However, Big Ben is under renovation and has been virtually inactive since 2017. To launch the famous bell, you need to pay half a million pounds. According to Boris Johnson, the government is considering raising funds among the population of the country. That is, ordinary citizens will have to pay for Johnson's shocking desire. Although, in principle, such little things are not even important. As with the signing of a trade deal between China and the United States, the main thing here is that the procedure is not slowed down and continues. Accordingly, in any case, we need to wait until January 31, after which we will conduct further fundamental analysis and monitor changes in macroeconomic indicators.
Based on all of the above, we believe that if today's report on inflation in the UK is not much stronger than 1.5% y/y, the pound may resume its downward movement. In any case, inflation is one of the most important indicators for any economy, and at a time when Britain is on the verge of reducing the key rate, any additional reduction and slowdown may cause the Bank of England to ease its monetary policy at the next meeting, on January 30.
The average volatility of the pound-dollar pair over the past 5 days is 86 points and continues to decline. According to the current volatility level, the working channel for January 15 is limited to the levels of 1.2931 and 1.3103, and we again expect to work out the lower limit of the volatility channel by the end of today. As before, the Heiken Ashi indicator signals the end of the correction by turning downwards.
Nearest support levels:
S1 - 1.3000
S2 - 1.2939
S3 - 1.2878
Nearest resistance levels:
R1 - 1.3062
R2 - 1.3123
R3 - 1.3184
Trading recommendations:
The GBP/USD pair has started a new round of correction. Thus, traders are advised to wait until the correction is completed and sell the pound again with a target of 1.2939, provided the price is located below the moving average line. It is recommended to buy the British currency not before the pair returns above the moving average with the first goal of 1.3103, but even in this case, it should be remembered that the fundamental background is not on the side of the pound.
In addition to the technical picture, you should also take into account the fundamental data and the time of their release.
Explanation of the illustrations:
The upper channel of linear regression - the blue lines of the unidirectional movement.
The lower channel of linear regression - the purple lines of the unidirectional movement.
CCI - the blue line in the indicator regression window.
The moving average (20; smoothed) - the blue line on the price chart.
Murray levels - multi-colored horizontal stripes.
Heiken Ashi - an indicator that colors bars in blue or purple.
Possible variants of the price movement:
Red and green arrows.
