24.01.202009:41 Forex Analysis & Reviews: Overview of GBP/USD on January 24. The pound is waiting for data on business activity in the manufacturing sector

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) - up.

CCI: 82.4121

The GBP/USD currency pair maintains a slight upward trend. In the context of yesterday, this situation is clear and understandable, since the British pound did not have the fall factors as the euro currency, in the face of Christine Lagarde's speech and the ECB meeting. However, in general, we also believe that the pound has no good reasons for strengthening and forming an upward trend. The upward movement that we have seen in recent days best fits the description of the word "correction". Correction against the movement on December 13-23 or against the movement on January 2-14. But one way or another, this is a correction. The question is: when will the downward movement resume, since all the fundamental and macroeconomic factors remain on the side of the US dollar? As in the case of the euro currency, the pair can not constantly move in one direction, which is why we are witnessing such temporary sections, when there seems to be no reason for the growth of the pound, but it shows this growth based on purely technical factors. Thus, as before, we recommend waiting for the technical indicators to turn down and trading lower. Purchases of the same pair can be considered, but be sure to remember that the macroeconomic background does not support the strengthening of the British currency.

Meanwhile, January 31 is approaching, and the last formalities for Brexit are being completed. Britain's Queen Elizabeth II signed the Brexit bill a few hours after both houses of the British Parliament agreed on the document and refused to amend it. At the same time, the European Parliament's Constitutional Affairs Committee also voted "Yes" to the Brexit agreement. Of the 26 members of the Committee, 23 supported the "deal" with Britain, while three opposed it. The head of the Committee, Antonio Tajani, said after the vote: "The plenary session of the European Parliament will vote on the agreement on January 29, after which the document will be immediately formally approved by the EU Council. The UK must leave the EU on January 31." Thus, there are formalities because it is unlikely that at least one EU leader will vote "no" on January 29. Tajani also said: "The UK is leaving the EU. This is a historic moment and the present time is not for celebration. We regret but respect the sovereign decision of the British people. Britain's exit is the antithesis of the values and goals of the European Union, which brings unity and prosperity to its citizens." On February 1, the "transition period" begins, and over the next 11 months, the UK will have to adhere to all the rules and regulations of the European Union, but will no longer have representative offices in the institutions of power of the Alliance.

It is difficult to say whether these formalities have any meaning for traders. By and large, since December 13, 2019, when the Conservative Party won the election and formed a "majority government", no one doubts that Brexit will be implemented. Thus, news of the ratification of the Brexit agreement does not matter much. On the other hand, macroeconomic statistics are still important, and business activity indices in the services and manufacturing sectors will be published in the UK today. Recall that the UK was the only country of the largest in the EU, where all three business activity indices went under the level of 50.0 and indicated a decline. Now, the index of business activity in the service sector "returned to life" and in December - 50.0, and in January, a value of 51.0 is predicted. The production sector is also beginning to "revive" and is projected to increase from 47.5 to 48.9. If the forecast values are confirmed today, the pound will even be able to get support from traders during the last trading day of the week. And if the pound rises again during the day, this can already be considered the beginning of the formation of an upward trend. The main thing is that other macroeconomic indicators also indicate the recovery of the UK economy. Then on January 30, the Bank of England will have less reason to lower the key rate. A reduction in the key rate is a "dovish" factor and will undoubtedly provoke a sell-off of the British currency. Thus, in the coming weeks, we will especially closely monitor British statistics, and on January 30 - the actions of the Bank of England, the vote of the monetary committee for changing the rate, as well as the performance of the head of the Regulator Mark Carney, for whom this will be the last meeting.

The average volatility of the pound-dollar pair over the past 5 days is 86 points. According to the current volatility level, the working channel on January 24 is limited to the levels of 1.3035 and 1.3207. Judging by the general trend, the pair will move towards the upper border of the channel, and a reversal of the Heiken Ashi indicator to the top will again indicate a resumption of the upward movement.

Nearest support levels:

S1 - 1.3123

S2 - 1,3092

S3 - 1.3062

Nearest resistance levels:

R1 - 1.3153

R2 - 1.3184

R3 - 1.3214

Trading recommendations:

The GBP/USD pair is in a state of weak correction. Thus, traders are now advised to continue to consider buying the pound with targets of 1.3184 and 1.3207, keeping in mind the lack of fundamental support (unless the data on British business activity is stronger than forecasts). It will be possible to sell the British currency after the pair's reverse consolidation below the moving average line with the first targets of 1.3031 and 1.3000.

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 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.