The Pound (GBP) Is Fast Increasing Once More
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The GBP/USD currency pair started moving upward again on Friday and is currently approaching the regional high of December 14. Traders may be unable to break through the Murray level of "8/8" (1.2451), but so far, everything indicates that the British pound will continue to rise. One should only attempt to explain why the British pound has climbed by 600 points over the previous two weeks if one wants to comprehend what is going on in the market right now. The likelihood of a subsequent increase in the BA rate has not increased during this time, and the Fed has not changed its monetary policy. The US inflation report, which showed a new, significant deceleration, is the only thing that can be noted. The market quickly rejoiced and rushed to sell US dollars because it believed that the Fed's monetary policy would soon slow down again.
Thus, the pound is fast increasing once more, but since it is a British currency, we can claim that this movement is at least somewhat predictable. Nevertheless, the pair corrected lower by 600 points in late December and early January. However, we are still baffled as to how the British pound can keep rising in value. The CCI indicator has entered the overbought region, which frequently heralds a reversal and movement in the other direction, even though all trend indicators are currently going upward. Although the meetings of the Bank of England and the Fed will take place in a week and a half, the market is already aware of both central banks' decisions. Of course, what the Central Bank leaders say matters as well, and there might be some surprises. However, the market can now determine those judgments that won't be made public until next week.
Formally, the GDP report is the most significant report of the week.
If the current week is boring for the European currency, it will be even more so for the pound. The producer price index will be released on Wednesday in the UK, and business activity indices for the manufacturing and service sectors will be released on Tuesday. Indicators of business activity are very likely to stay below the 50.0 thresholds, and the producer price index doesn't usually cause a market reaction. We are not anticipating any crucial communications from the UK. It remains only to consider the American events.
Business activity indices will once more be released in the United States tomorrow, and they will also remain nearly 100% below the "waterline." A report on the fourth quarter's GDP and orders for long-term goods will be released on Thursday. Data on American citizens' spending and income, as well as the University of Michigan's consumer sentiment index, were released on Friday. The GDP report will undoubtedly garner the greatest interest. Currently, the official prediction indicates a quarterly rise of 2.6-2.7%. That is, although there is still a 50% chance that the American economy will experience a recession this year, it has not yet happened. The US economy expanded in the most recent quarter, and this development may have strengthened the dollar had the market not been generally inclined to buy the euro and the pound. As a result, we think that the dollar won't increase significantly even if the GDP report's predicted value is exceeded.
Every other report is solely secondary information. Of course, in theory, the market might potentially react to them, but in practice, if it does, it will either be minimal or nonexistent. Furthermore, these data won't be able to change the market's sentiment enough to stop the dollar's upward trajectory. Additionally, there won't be any significant speeches this week because there is a "silent mode" 10 days before the next central bank meeting. We won't get any new information from the primary source because Fed officials aren't allowed to speak on monetary policy. But because nearly all of the monetary committee members spoke last week and we are aware of what to anticipate from the Federal Reserve next week, it is no longer necessary.
Over the previous five trading days, the GBP/USD pair has averaged 117 points of volatility. This figure is "high" for the dollar/pound exchange rate. Thus, we anticipate movement inside the channel on Monday, January 23, with movement being constrained by levels of 1.2302 and 1.2535. A new phase of the corrective movement is indicated by the Heiken Ashi indicator turning downward.
Nearest levels of support
S1 – 1.2390
S2 – 1.2329
S3 – 1.2268
Nearest levels of resistance
R1 – 1.2451
R2 – 1.2512
R3 – 1.2573
Trading Suggestions:
On the 4-hour timeframe, the GBP/USD pair is still rising. Therefore, until the Heiken Ashi indicator swings down, it is still possible to hold long positions with goals of 1.2512 and 1.2535. If the price is locked below the moving average with targets of 1.2207 and 1.2146, short trades may be opened.
Explanations for the illustrations:
Determine the present trend with the use of linear regression channels. The trend is now strong if they are both moving in the same direction.
Moving average line (settings 20.0, smoothed): This indicator identifies the current short-term trend and the trading direction.
Murray levels serve as the starting point for adjustments and movements.
Based on current volatility indicators, volatility levels (red lines) represent the expected price channel in which the pair will trade the following day.
A trend reversal in the opposite direction is imminent when the CCI indicator crosses into the overbought (above +250) or oversold (below -250) zones
Relevance up to 07:00 2023-01-24 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
