17.05.202205:01 Forex Analysis & Reviews: Overview of the GBP/USD pair. May 17. The UK and the European Union are clearly bored with life: a trade war may begin.

The British currency cannot show tangible growth against the dollar and cannot even really adjust, although it has lost about 800 points in recent weeks alone. We have already said earlier that, firstly, the pound has less reason to show a fall against the dollar. And this, in principle, is true, since against the upward trend of 2020, the euro currency has already "adjusted" by more than 100%, and the pound - only by 70%. Second, all the factors of the growth of the dollar and the fall of the pound could have already been worked out 10 times. But the situation remains very ambiguous. Naturally, all the main issues are now related to the monetary policies of the BA and the Fed, as well as inflation. If by the end of April in the US, inflation slowed to 8.3% y/y, then in the UK it may rise to 9%. Recall that both Central banks raised their rates to 1%, but Britain began to tighten monetary policy earlier, so it could be assumed that inflation should begin to slow down first in the UK. However, the factor of a new acceleration in inflation does not mean that now the Bank of England will adopt the pace of Fed rate hikes. That is, the pound is unlikely to find market support due to high inflation. On the other hand, the US GDP in the first quarter showed a drop of 1.4%, and the UK GDP - an increase of 0.8%. And how do analyze all this data and put it together? Each currency has growth factors, but at the same time, the American currency is still growing. Therefore, we continue to lean towards the point of view that now traders are selling the pound and the euro simply by inertia. There is no such bad news and reports for the British pound now that it could not even adjust normally against a fall of 800 points.

A military conflict in Ukraine with horrific consequences for Europe? Not enough! Let's start another trade war.

Sometimes it seems that the whole world has gone mad, and all diplomats have died out like mammoths. Considering how many military conflicts there have been over the past 50-60 years, the question arises: why do we need international diplomats at all if they can't agree on anything? If the fate of entire countries is decided by literally a few people who can do almost anything they want? Even if we do not take into account the conflict in Ukraine, the peace talks which logically failed, let's pay attention to the trade relations between China and the United States. Three years ago, the two largest economies could not agree with each other, so a trade war began. Former US President Donald Trump played a huge role in its beginning, and the results of this war are very far from those that Washington expected. Further, now there are disagreements between Finland and Russia regarding the accession of the first to NATO, and what do we see? Both sides are threatening each other again (including Finland) and rattling their weapons instead of trying to negotiate.

But the apotheosis of all this madness is a possible trade war between the European Union and the UK. Britain, which left the EU with such pathos, now believes that all agreements with the EU can be revised at its first wish. The Northern Ireland Protocol, in the wilds of which even Brussels and London have already become entangled, does not suit Britain, but there is an agreement, and it is signed, including by Boris Johnson, as he is regularly reminded in the European Union. But in the end, everything can end with the termination of the trade deal, since London can apply Article 16 of the Brexit agreement and withdraw from the agreement. The European Union may also withdraw from it if London begins to change the rules of the game and violate agreements unilaterally. And as a result, it turns out that the Alliance and the Kingdom, which actively support Ukraine in the conflict with Russia, can simultaneously wage a trade war with each other. And all this against the background of the impending food and energy crisis. All this at a time when the whole of Europe should unite and help to complete the military operations in Ukraine as soon as possible, so as not to suffer the most elementary. These are the realities of 2022. Does anyone else think that the 2020 pandemic was a terrible event? The realities show that those were "seeds".

The average volatility of the GBP/USD pair over the last 5 trading days is 97 points. For the pound/dollar pair, this value is "average". On Tuesday, May 17, thus, we expect movement inside the channel, limited by the levels of 1.2179 and 1.2374. A reversal of the Heiken Ashi indicator back down will signal a possible resumption of the downward movement.

Nearest support levels:

S1 – 1.2207

S2 – 1.2146

S3 – 1.2085

Nearest resistance levels:

R1 – 1.2268

R2 – 1.2329

R3 – 1.2390

Trading recommendations:

The GBP/USD pair maintains a downward trend in the 4-hour timeframe. Thus, new sell orders with targets of 1.2207 and 1.2179 should be considered at this time after the reversal of the Heiken Ashi indicator down. It will be possible to consider long positions if the price is fixed above the moving average line with targets of 1.2374 and 1.2390.

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 now.

Moving average line (settings 20.0, smoothed) - determines the short-term trend and the direction in which trading should be conducted now.

Murray levels - target levels for movements and corrections.

Volatility levels (red lines) - the likely price channel in which the pair will spend the next day, based on current volatility indicators.

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.