22.07.202204:38 Forex Analysis & Reviews: Overview of the GBP/USD pair. July 22. Elections in the UK: there are two candidates left.

The GBP/USD currency pair could not continue its upward trend on Thursday, which had begun a few days prior. Remember that we have consistently cautioned that the euro and the pound continue to appear extremely unstable and weak. It's merely that no currency pair can move in only one direction consistently. What have we witnessed in recent days? From two-year lows, the growth of the pound sterling by fewer than 300 points. 300 points for the British pound is nothing. Therefore, it is difficult to draw such a bold conclusion as the end of one trend and the start of another. In actuality, we had a mundane correction with a relatively modest correction in the backdrop of a nearly two-year downturn. Thus, the decline of the British pound could resume at any moment. It is confirmed that neither the basic nor the geopolitical contexts have altered recently. Why should the downward trend halt if the forces pushing the pound lower over the past few months continue to be significant?

Perhaps anything will change following the Bank of England meeting. Recall that, unlike the ECB, the Bank of England hiked the key rate five times in a row, which has not occurred in the United Kingdom for a very long time. And the pound sterling is depreciating versus the dollar at a slower rate than the euro. If the Bank of England raises the rate by 0.5 percent instead of 0.25 percent at the beginning of August, this may give extra support to the British pound. But will this support be sufficient to halt the dollar's decline at least? Next week, the Fed may increase its rate by at least 0.75 percent. And other analysts are already predicting a one-percent hike. This unprecedented rate of monetary policy tightening might spark a new wave of dollar demand.

Penny Mordaunt is withdrawing from the election.

In the meantime, we are returning to the topic of the election of a new Conservative Party leader and Prime Minister of the United Kingdom. According to the results of the subsequent election round, just two candidates survived. In yesterday's post, we predicted that Liz Truss and Rishi Sunak would advance to the final round. Although Penny Mordaunt placed second out of three in the second-to-last round, she did not win the competition. However, she lost yesterday's vote. Thus, all Conservative Party members will select between the former Finance Minister and the current Foreign Minister on July 22.

Remember that Rishi Sunak is an economist and financier. Many party members support him, but others oppose him, notably Boris Johnson, who urges voting for any candidate other than Rishi. It will no longer function for anyone, as only Liz Truss remains. Multiple variables work against Sunak. Under his watch, the next financial crisis in the United Kingdom began. Certainly, the military situation in Ukraine, the coronavirus pandemic, and other external causes are also responsible, but it is not sufficient to absolve Sunak of all fault. Second, he opposes tax cuts and advocates their increase. Third, many comment on his lack of leadership characteristics and international political expertise.

Liz Truss has less support from fellow party members and is a sort of successor to Margaret Thatcher's traditions. As the Minister of Foreign Affairs, she is well-versed in international politics, openly opposes the Russian Federation, and supports Ukraine. He opposes tax rises, yet he is less popular than Rishi Sunak. In the previous vote, 113 Conservative MPs supported her. For Sunak – 137. Sunak's triumph appears already in the bag, but we believe a surprise may occur in the final round. Considering that up to 160 thousand conservatives would vote, it is difficult to draw inferences from the vote of 350 conservative legislators. In any case, we should have the winner within the next several days, who will be formally announced on September 5.

During the last five trading days, the average volatility of the GBP/USD pair was 112 points. This value for the pound/dollar combination is "high." On Friday, July 22, we, therefore, anticipate price action within the channel, bounded by the levels of 1.1845 and 1.2069. A reversal of the Heiken Ashi indicator to the upside may imply a continuation of the upward trend.

Nearest support levels:

S1 – 1.1902

S2 – 1.1841

S3 – 1.1780

Nearest resistance levels:

R1 – 1.1963

R2 – 1.2024

R3 – 1.2085

Trading Recommendations:

On the 4-hour timeframe, the GBP/USD pair remains above the moving average. Therefore, additional buy orders with targets of 1.2024 and 1.2069 should be considered if the Heiken Ashi indicator reverses to the upside. Open sell orders should be positioned between 1.1902 and 1.1841 below the moving average.

Explanations for the figures:

Channels of linear regression – aid in determining the present trend. If both are moving in the same direction, the trend is now strong.

The moving average line (settings 20.0, smoothed) – determines the current short-term trend and trading direction.

Murray levels serve as movement and correction targets.

Volatility levels (red lines) represent the expected price channel that the pair will trade within over the next trading day, based on the current volatility indicators.

The CCI indicator – its entry into the oversold area (below -250) or the overbought area (above +250) indicates that a trend reversal is imminent.