4-hour timeframe
Amplitude of the last 5 days (high-low): 68p - 104p - 108p - 87p - 194p.
Average volatility over the past 5 days: 113p (high).
The GBP/USD currency pair continued to conduct indistinct multidirectional trading for most of last week. In general, the entire period of indistinct movements was several months. However, as we have repeatedly warned traders, sooner or later, the luck of the British currency in any case would end. If the situation for the GBP/USD pair was neutral, then we could equally expect an upward trend and a downward trend. However, we have repeatedly warned: there are no grounds for strengthening the pound.
From time to time, the market openly finds a reason for restrained purchases of the pound, but this is not often the case. Moreover, the situation for the pound is getting worse and worse every quarter. Previously, only Brexit and any uncertainty associated with it scared traders. Now, traders are afraid of Brexit without a deal with the EU. The most interesting thing is that if the government of Boris Johnson does not agree with Brussels, and it clearly does not burn with the desire to do this, then, in fact, Britain will be faced with the "hard" Brexit. That is, the two-year war of the Parliament with the prime ministers will be in vain. As we have said more than once, the UK economy is already losing 70 billion a year, experiencing serious problems, and slowing down. And factors such as, for example, the coronavirus, are also relevant to the British economy. In general, the situation remains, if not hopeless, then very difficult. On the last trading day of the week, pound quotes fell, although formally there were no reasons for this. Most other currencies went up against the dollar, however, the pound found the most inopportune moment to collapse.
As for macroeconomic statistics this week, everything is very, very simple here. Not a single more or less significant report has been received from the UK. The first three days the calendar of events was completely empty in the United States. Several reports were published only on Thursday and Friday, but the most important (orders for durable goods, GDP) were simply ignored by traders. But on Friday, when much less significant data were published, the pound collapsed like a cut.
The most significant reports published on Friday - the change in the average level of income and expenses of the US population. Personal incomes of Americans grew by 0.6% in January, which is much higher than all experts' forecasts.
But personal expenses increased by only 0.2% in January compared with December, which is lower than forecasted values. Thus, in general, we can say that both indicators remained at their stable levels (as can be seen from the two-year data on income and expenses) and, in general, they can be considered neutral.
Another more or less significant index is consumer confidence from the University of Michigan. This indicator increased from 100.9 to 101.0. Purely formal growth.
The fundamental background from the UK over the past week was limited only to secondary messages, such as preparing both sides for the upcoming talks. The first reports of infection of British citizens with the coronavirus were also received. Mark Carney said the Chinese virus has already begun to negatively impact the British economy. Carney complained that the problems for the British economy could be the supply of goods, parts, or equipment from China, where quarantine has been declared in some provinces, many businesses are not functioning, or are operating on a limited basis. For example, the largest British automaker Jaguar Land Rover said that it has enough spare parts from China to maintain its British production for two weeks, no more. Thus, problems with deliveries from China can slow down the British economy even more, which already showed zero growth in the last quarter. Accordingly, the pound also has nothing to expect except a miracle. Perhaps traders will decide to wait for the receipt of important information from the negotiations on the deal, and before that they will decide not to build up their positions. It may take several weeks before this, as the negotiations should last at least for some time so that it can be concluded that the negotiations are progressing. However, even this hope does not save the pound from long-term downward prospects.
From a technical point of view, the pound/dollar pair worked out the second support level of 1.2747 and rebounded from it. Therefore, correction may begin in the near future. We also believe that markets should calm down because Friday's trading was too volatile.
Trading recommendations:
GBP/USD starts upward correction. Thus, it will be possible to sell the British pound again with targets at 1.2747 and 1.2700, after the correction is completed. We recommend considering the pair's purchases with a view to the Senkou Span B line in small lots if the bulls are able to gain a foothold above the Kijun-sen line. In any case, the fundamental background remains not on the side of the pound.
Explanation of the illustration:
Ichimoku indicator:
Tenkan-sen is the red line.
Kijun-sen is the blue line.
Senkou Span A - light brown dotted line.
Senkou Span B - light purple dashed line.
Chikou Span - green line.
Bollinger Bands Indicator:
3 yellow lines.
MACD indicator:
Red line and bar graph with white bars in the indicators window.
Support / Resistance Classic Levels:
Red and gray dashed lines with price symbols.
Pivot Level:
Yellow solid line.
Volatility Support / Resistance Levels:
Gray dotted lines without price designations.
Possible price movements:
Red and green arrows.
