29.03.202011:37 Forex Analysis & Reviews: GBP/USD. Results of the week. Bank of England has exhausted all the main tools for influencing the economy

24-hour timeframe

In our article on the EUR/USD pair, we said that a strong fall in the euro currency, and now an equally strong growth which has not even ended, is difficult to call reasonable and logical. Things are even worse in the GBP/USD pair. The pound has fallen 16 cents in ten days, and is now up ten cents in the past six. Thus, such levels of volatility are the best way to signal the panic state of the market. And of course, the main cause of panic is the coronavirus epidemic all over the world. The UK is no exception. The country has officially registered 17,000 cases of the disease, including Prince Charles and Prime Minister Boris Johnson. There is no question of any localization of the disease now. And how can you localize a virus that has already been detected in every European, British and American region and city? Thus, we now believe that the British pound can fully recover all the losses that it has suffered over the past month. The question is, what happens after? It is unlikely that after reaching the levels of 1.2800 – 1.3100, where, in fact, everything started, traders will calm down, and volatility will fall to the usual values. Most likely, either the strong growth of the pair will continue, or a new downward trend will begin. As we have repeatedly said, it is extremely difficult to predict the movement of the pair in the current conditions, so it is best to follow the trend on the 4-hour chart, where it is easier and faster to track all price reversals,which are now, fortunately, a little.

Last week, several more or less significant macroeconomic reports were published in the UK. The biggest surprise, perhaps, was the data on business activity in the services and manufacturing sectors. If the PMI for the services sector fell much more than experts predicted, immediately to 35.7 points, then in the manufacturing sector, the slowdown in business activity was only 3.7 points, to 48.0. Almost all other events and news of the week did not arouse any interest among market participants. For example, the next meeting of the Bank of England was held this week. Next - because recently the central banks of the leading countries of the world like to hold unscheduled and emergency meetings. However, no major decisions were made at this meeting. In principle, this fact did not surprise traders at all, since the BoE was not initially set to reduce rates below zero, and the asset purchase program was only recently expanded to 645 billion. Thus, no changes in monetary policy parameters were expected. Furthermore, the consumer price index in Britain for February was published this week, which is predicted to slow down to 1.7% yoy, but this data did not cause any interest among traders.

Thus, we believe that now more important events are taking place in the United States, where the number of people infected with the coronavirus is growing, but in addition to this, there is also the "Trump factor". We remind traders that US President Donald Trump, despite the fact that the epidemic is spreading rapidly throughout the country (30% growth would have been recorded yesterday), believes that all Americans should go to work after April 13. According to Trump, "the cure for the disease should not cost more than the disease itself." Probably, Trump believes that if the epidemic is allowed to spread freely in America, the population will sooner recover from the disease and recover faster. This cannot be said about the US economy, which contracts the more, the longer the period of quarantine is in the country. Fortunately for Americans, Trump cannot make decisions alone. There is Congress, Senate, and Democrats who are already in a state of open war with the current president. However, Trump's intention to end quarantine in spite of the fact that the epidemic can cover from 60% to 80% of the country's population looks at least strange. The economy is unlikely to accelerate if more than half of Americans leave on sick leave. However, we believe that this story is not yet complete. For Trump, for whom the economy is really most important, there is nothing left to do but look for ways to revive it. Otherwise, his political ratings may begin to decline in anticipation of the 2020 elections. Although, on the other hand, it should also be noted that we regularly write about a possible decrease in Trump's ratings, however, according to various opinion polls and studies, the ratings of the US president are growing, despite the epidemic. However, we would not make unambiguous conclusions that Trump would be re-elected. Now the situation in the world is changing too dramatically, and no one can predict what will happen in the world in a few months.

From a technical point of view, the pound/dollar pair starts a highly volatile swing. Since now it is impossible to say unequivocally that "the dollar is weaker than the pound" or vice versa, the direction of movement can constantly change. However, data for March will begin to be available to traders in April. That is, we will finally be able to estimate the losses suffered by the British, American and European economies over the past month. We will be able to assess the scale of the contraction in the economies of these regions, and if in a particular region the contraction is especially greater, this could be a factor in pressure on the national currency of this region.

Recommendations for long positions:

The pound/dollar started a strong upward movement and overcame the critical Kijun-sen line on the 24-hour timeframe. Thus, the upward movement may continue with targets 1.2626 and 1.2912 (immediate goals), but it is best to track the technical picture on a 4-hour chart.

Recommendations for short positions:

It will be possible to sell the British pound no earlier than the price consolidating below the Kijun-sen line. New targets for sell orders will be formed for the 24-hour timeframe on April 1.