The GBP/USD currency pair on Thursday again fell to the Murray level of "5/8"-1.2024 and proved unable to overcome it again. If you look carefully at the illustration above, it becomes clear that the price has already failed to overcome this level three times and gained a foothold above the Murray level of "+1/8"-1.2268 twice. What is it if not a side channel? We are all used to the fact that if we are talking about a flat or sideways, this range is 100-150 points wide. However, as practice shows, there are wider channels; at this time, the pound may be in one of those. Of course, we hope these tests of the same levels are a simple coincidence, which also cannot be ruled out. But in this case, in the coming days, the price should overcome the level of 1.2024 and continue to move down. At the same time, the euro/dollar pair also risks returning to its side channel and does not manage to break through its lower border in any way. As a result, both major pairs can now not continue the downward trend movement, which is fundamentally justified and geopolitically because of the same level. And if this level is not overcome, there is a high probability of a new flat.
The pound has slid by 300 points over the past 5-6 trading days. It showed the greatest interest in the report on British inflation, which is the first of the three countries we analyzed to exceed the 10% mark. As we have already said, the fall of the British pound on the growth of inflation is not entirely logical in the current conditions. The UK central bank will have to strengthen its monetary onslaught since the measures have not even led to a slowdown in price growth. However, in the current circumstances, an increase in inflation no longer means that the rate will rise stronger, faster, and more aggressively. The market could lose faith in BA's ability to control inflation. Meanwhile, the Fed has taken the first step towards achieving the main goal of 2022.
Liz Truss is leading the race for the post of Prime Minister of Great Britain.
A few weeks ago, when the election of the new leader of the Conservative Party after the resignation of Boris Johnson was beginning, we said that Liz Truss, who currently holds the post of Foreign Minister, would win it with a high degree of probability. Recall that all the preliminary rounds were won by Rishi Sunak, who recently held the position of Finance Minister but left as a sign of disagreement with Boris Johnson's policy. We said that Rishi Sunak is an excellent economist and financier, but other qualities are needed to rule the country. First of all, we need popularity among voters and the electorate. Second, leadership skills and an understanding of the geopolitical situation in the world are required. Rishi Sunak can hardly boast of these qualities. Therefore, his victories in the preliminary rounds of the elections do not mean anything. Now, when there are only two candidates for the post, but the final round of voting has not yet begun (and all 160 thousand members of the Conservative Party will take part in it), many research and analytical agencies are conducting opinion polls to find out who is leading in the race. And all these polls show that the majority of votes in the final vote will go to Liz Truss.
According to Opinium Research, about 61% of Conservatives will vote for Truss. Among the reasons why they are ready to make such a choice are a higher level of trust in her, personal dislike for Sunak, and her loyalty to Boris Johnson. However, there are probably other, more professional reasons. If Truss wins, there is no doubt that the vector of Great Britain's geopolitics will not change. How will this affect the pound sterling? Most likely, nothing, since the "foundation", which remains in favor of the dollar, is much more important now. But even if the "foundation" deteriorates, technical signals are needed for a new fall in the British pound. There are none yet.
The average volatility of the GBP/USD pair over the last 5 trading days is 111 points. For the pound/dollar pair, this value is "high." On Friday, August 19, thus, we expect movement inside the channel, limited by the levels of 1.1857 and 1.2080. A reversal of the Heiken Ashi indicator upwards will signal a new round of upward correction.
Nearest support levels:
S1 – 1.1963
S2 – 1.1902
S3 – 1.1841
Nearest resistance levels:
R1 – 1.2024
R2 – 1.2085
R3 – 1.2146
Trading Recommendations:
The GBP/USD pair continues to be located below the moving average on the 4-hour timeframe. Therefore, at the moment, you should stay in sell orders with targets of 1.1902 and 1.1857 until the Heiken Ashi indicator turns up. Buy orders should be opened when fixing above the moving average line with targets of 1.2146 and 1.2207.
Explanations of the illustrations:
Linear regression channels – help determine the current trend. If both are directed in the same direction, then the trend is strong.
Moving average line (settings 20.0, smoothed) – determines the short-term trend and the direction in which trading should be conducted now.
Murray levels are target levels for movements and corrections.
Volatility levels (red lines) are the likely price channel in which the pair will spend the next day, based on current volatility indicators.
The CCI indicator – its entry into the oversold area (below -250) or into the overbought area (above +250) means that a trend reversal in the opposite direction is approaching.
