Higher linear regression channel: direction – downward.
Lower linear regression channel: direction – downward.
Moving average (20; smoothed) – downward.
The British pound starts the third trading day of the week in a downward movement inside the same 400-point side channel, getting closer to its lower border. Thus, in the near future, the pound/dollar pair may be followed by an upward reversal with further movement to the area of the Murray level of “7/8”-1.2634. At the same time, the pair can overcome the lower border of the channel and thus leave it, starting the formation of a new downward trend. We note that the lower border of the channel has an indistinct price value and can fall down to the level of 1.2165 – the minimum from April 7.
Just yesterday, we reported that the mood of Donald Trump is characterized as “gloomy”, according to sources of the Washington Post in the White House. Sources say that the American President is very upset that his ratings continue to fall, while the ratings of his main opponent, Joe Biden, are growing. His nervousness, however, is visible not only to the White House staff. As recently as today, Donald Trump held a regular briefing, during which he was asked why the US leader constantly talks about the number of tests conducted for “coronavirus” (according to Trump, the number of tests conducted in the US is the highest in the world, although we have already written that if we take the number of tests conducted per capita, the United States do not even enter the top five) instead of paying attention to the number of infected people and the number of deaths from the pandemic. Trump flared up and said the following: “Perhaps this is a question you should ask China. Don’t ask me, ask China. If you ask them, you may get a very unusual answer.” After that, the President interrupted the conference, not forgetting to call the question of the journalist of Asian origin “vile”.
Meanwhile, the conflict between the US and China, despite the assurances of Steven Mnuchin, Liu He and Robert Lighthizer, continues to gain momentum. For example, according to the latest information, the US FBI plans to bring charges against China in an attempt to steal data on research “coronavirus”. The message reads: “The PRC tried to gain secret access to valuable information protected by intellectual property rights, as well as data related to the development of a vaccine.” The US Agency for Cybersecurity and Infrastructure Protection said it was investigating a series of cyberattacks on pharmaceutical companies, medical organizations, and universities.
At the same time, information came from China itself that Beijing is seriously considering canceling the trade deal with America, which was reached with great difficulty in January this year, after almost 2 years of a trade war. As a reason, Washington’s too aggressive “anti-Chinese” position on the issue of the COVID-2019 virus pandemic is called. Beijing is going to terminate the previous deal and sign a new one on more favorable terms. It is reported that in the current version of the agreement, there is a clause “on force majeure”, which Beijing is going to refer to. According to Chinese experts, the United States will not be able to resume the trade war with China now, given the depth of the recession in their economy. This information has already reached Donald Trump, who commented: “I also heard that they want to return to negotiations in order to reach a more profitable deal for themselves. However, we signed the agreement and the US is not going to review it.”
If Beijing really goes to break the current agreement, then it will deal a blow not only to the American economy, which, as we can already see, will suffer much more than the Chinese one but also to Donald Trump personally. After all, in fact, Trump spent two years trying to negotiate more favorable terms of trade for America with China. Now, when Trump has already lost such trumps as a low unemployment rate, a strong economic recovery and a strong labor market, the termination of the deal with China may further lower his political ratings. What will Trump be able to say during his election campaign to Americans in this case? Just what he does throughout his entire presidential term. Blames former presidents, China, Jerome Powell, the Democrats, Joe Biden, and anyone else who comes along for America’s troubles. However, any people can believe in this kind of information, but only for a certain time. Sooner or later, the question will arise, why exactly during the Trump administration had so much trouble, and instead of the promised economic growth, the country gets a second Great Depression? In any case, the American people just want to live well, just like any other people on the planet. If the current government does not cope with this task, then you need to vote for another candidate. Thus, it is China that can finally kill all of Donald Trump’s hopes for re-election. Of course, while this is only a rumor, however, you will agree that “there is no smoke without fire”.
On Wednesday, May 13, the UK is scheduled to publish GDP for March in monthly terms, preliminary GDP for the first quarter, as well as industrial production. It is easy to guess that all these indicators will collapse down, as well as many others, so traders should not wait for positive news today. According to experts’ forecasts, the UK’s GDP in March may decline immediately by 8%, and in the first quarter – by 2.1% in annual terms and 2.5% in quarterly terms. Industrial production may lose 9.3% y/y and 5.6% m/m in March. We believe that market participants will continue to ignore any macroeconomic information. At this time, it is also because it is equally bad in Britain and in the US. The US currency rose again against the British pound yesterday, despite a weak report on inflation in the United States. Thus, we believe that technical factors remain in the first place when determining the trend and forecasting further movement. It should be added that the UK officially came out on top in Europe yesterday in the number of “coronavirus” diseases, overtaking Italy and Spain, as well as the first place in the number of “deaths” in Europe, which clearly does not add to the optimism of buyers of the British pound.
The average volatility of the GBP/USD pair has increased slightly in recent days and is currently 125 points. For the pound, this is not too much, and there are no signs of a serious increase in volatility yet. On Wednesday, May 13, we expect movement within the channel, limited by the levels of 1.2146 and 1.2396. A reversal of the Heiken Ashi indicator upward will indicate a new round of upward movement.
Nearest support levels:
S1 – 1.2329
S2 – 1.2268
S3 – 1.2207
Nearest resistance levels:
R1 – 1.2390
R2 – 1.2451
R3 – 1.2512
The GBP/USD pair resumed its downward movement on the 4-hour timeframe. Thus, technically, short positions with the goals of 1.2268 and 1.2207 are currently relevant, but the downward momentum may run out at any moment. On the approach to the lower border of the side channel, we believe it is not advisable to sell the pair. It is recommended to buy the pound/dollar pair not before fixing the price above the moving average with the first goals of 1.2450 and 1.2512.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.