04.06.202002:11 Forex Analysis & Reviews: Overview of the GBP/USD pair. June 4. Donald Trump's "anti-China" alliance. Bank of England recommends preparing for no-deal with the European Union

4-hour timeframe

Technical details:

Higher linear regression channel: direction - upward.

Lower linear regression channel: direction - upward.

Moving average (20; smoothed) - upward.

CCI: 99.9588

The British pound on Wednesday also continued to rise quietly, ignoring the technical need for a correction. However, on the approach to the level of 1.2642, which is the local maximum, still slowed down its growth. In general, nothing has changed for the British currency in recent days. It is also growing based on the fears of investors and traders for mass pogroms, rallies, and protests in the United States, relating not only to the racist scandal but also to the dissatisfaction of American citizens with the US government. When was the last time this happened? Americans are dissatisfied with the scale of the economic crisis, the scale of the epidemic, high unemployment, and a reduced standard of living. Thus, the murder of George Floyd was only the "last straw in an overflowing glass" of American displeasure. And now the question of when and how rallies, protests, and riots will be stopped is really acute. After all, they are clearly not peaceful in many cities and are accompanied by pogroms, arson, looting, robberies and clashes with the police. The longer this chaos in the US continues, the more the US currency is at risk of falling. Moreover, a new round of "trade war" with China may begin in the near future. Although Donald Trump has not yet moved from words to deeds and has not imposed any restrictions and sanctions against Beijing, nevertheless, hardly anyone expects that the "Hong Kong issue" and "coronavirus claims" will simply be leveled out of the blue. This means that the conflict between Washington and Beijing is still brewing and may break out at any moment, just as riots broke out in America itself. Thus, we do not even risk making any medium-term forecasts for the pound/dollar pair right now. There are too many potentially important topics that can have a strong impact on the market. After all, we should not forget that the UK has its own problems. A new political crisis is brewing, as the government of Boris Johnson failed to prepare for the epidemic and the very opposition to the "coronavirus", can not or does not want to negotiate an agreement with the European Union, and meanwhile, the political ratings of the Laborites, after the departure of Jeremy Corbyn, are growing. People in Britain are just as dissatisfied with what is happening, and especially with the prospects that await them in the coming years, as the American people are with what is happening in America. We have already mentioned that due to the "coronavirus epidemic" and the crisis caused by it, the UK budget may not receive from 30% to 50%. This means that this money will have to be taken somewhere, borrowed somewhere, or raised taxes for the population. But in any case, through taxes or through loans, but ordinary British people will pay them back. Moreover, the absence of an agreement with the European Union will mean that the financial situation of the UK will continue to deteriorate in 2021, because more than 50% of Britain's exports were sent to the EU. Thus, it is completely possible that in the near future new battles and frictions will begin between the Labor and Conservatives in the Parliament. However, this time it will be extremely difficult for the Laborites to impeach or vote of no confidence in the Prime Minister. All because the British people gave the Conservative Party too much power, which allowed it to form a "majority government". By and large, this means that Boris Johnson can make any decisions individually. It will be possible to remove him from office only if there is a political split among the Conservatives themselves.

By the way, the Bank of England made an official statement yesterday, in which it recommended that participants in the financial sector prepare for the fact that there will be no agreement with the European Union. This was announced by the head of the Bank of England, Andrew Bailey, in a dialogue with the directors and managers of the largest commercial banks in the UK. Thus, the regulator has made it clear that it is not waiting for the conclusion of a trade agreement between Brussels and London and is preparing for the worst.

At the same time, the conflict between the UK and Beijing is beginning to grow. We have already said that London is going to allow Hong Kong residents to live and work in the UK without any restrictions, if Beijing passes the controversial law "on national security in Hong Kong". Boris Johnson said on Wednesday that the UK will not abandon the residents of Hong Kong to their fate, and the law that the PRC is going to adopt is contrary to international law and the agreement of 1984. "If China continues, it will be contrary to its obligations in our joint declaration, a legally binding treaty registered with the UN," Johnson said on June 3. Thus, about 350,000 Hong Kongers already have the necessary documents and can move to Britain, and another 2.5 million people will have the right to do so.

Also, traders received very interesting information yesterday concerning the possible future isolation of China. We have already said that it is not only the United States that is making claims against Beijing, which is the main and only culprit for the spread of the COVID-2019 virus. Britain has already made a statement that it does not know how it will continue to deal with China after the incident. Germany made a similar statement. Ni Feng, Director of the Institute of American Studies of the Chinese Academy of Social Sciences, believes that Washington will seek to create a coalition against China, to this end, it wants to enlist the support of other major players in the international arena. The goal is simple: isolate China and make it play by its own rules. However, Chinese political scientists and economists do not believe that this plan of Donald Trump, who may leave office at the beginning of 2021, will work. Nevertheless, a mass siege of China may begin immediately after the final victory of mankind over the virus.

There are no major events scheduled for the penultimate trading day of the week in the UK. Only the index of business activity in the construction sector for May will be published, which may rise from 8.2 to 29.7 points. However, this will not make any difference, since below the 50 mark, any value of the indicator is negative. And the report itself is now so insignificant that it does not deserve attention. Thus, traders are likely to continue to monitor all news and reports related to the riots in the US, the EU-UK negotiations. From a technical point of view, a correction has been brewing for a long time, but there is no signal of its beginning yet.

The average volatility of the GBP/USD pair continues to decline and is currently only 108 points. For the pound/dollar pair, this indicator is "high". On Thursday, June 4, thus, we expect movement within the channel, limited by the levels of 1.2485 and 1.2701. A downward turn of the Heiken Ashi indicator will indicate a downward correction.

Nearest support levels:

S1 – 1.2573

S2 – 1.2512

S3 – 1.2451

Nearest resistance levels:

R1 – 1.2634

R2 – 1.2695

R3 – 1.2756

Trading recommendations:

The GBP/USD pair continues to move up quite strongly on the 4-hour timeframe. Thus, today it is recommended to continue trading the pound/dollar pair for an increase with the goals of 1.2634 and 1.2695 and keep the longs open until the Heiken Ashi indicator turns down. It is recommended to sell the pound/dollar pair when the bears manage to return to the area below the moving average, with the first targets of 1.2390 and 1.2329.