20.05.202204:57 Forex Analysis & Reviews: Overview of the GBP/USD pair. May 20. The UK and the European Union remembered that they have their own reason for the conflict.

The GBP/USD currency pair managed to stay above the moving average on Thursday, which can also be considered a victory. The British currency made an impressive upward leap this week, which was far from completely provoked by macroeconomic statistics. We are more inclined to the opinion that "macroeconomics" has only slightly affected the mood of traders. For the most part, the pound was growing because it was high time for it to show a normal correction. That is, because of a purely technical factor. If so, then the growth of the British pound may now continue for several weeks, at least. So far, it is difficult to say how strong it will be and how long. Still, do not forget that the "foundation" and geopolitics continue to be very significant factors in the foreign exchange market. Nevertheless, if the mood is now changing to "bullish", then the pound finally has the opportunity to "rise from the dead".

In recent articles, we have already said that both the euro and the pound already look frankly oversold. We were most confused by the fact that the Bank of England raised the key rate four times, but at the same time, the pound continued to fall. It's not even about the Fed, which also raised the rate to 1%. The point here is that traders practically turned a blind eye to important changes in the monetary policy of not the most recent central bank in the world. We're not talking about the central bank of Uganda. Thus, now the pound can also grow on the basis that it has fallen not just low, but excessively low. That is, the market will, as it were, look for a balance, and return the pound to its real values. If so, the downward trend is over for a while. But again, we should not forget about geopolitics, which is almost the main factor in the fall of risky currencies in recent months.

Britain and the EU remembered the "Northern Ireland Protocol".

Meanwhile, the EU and Britain, which have been in the same boat in recent months on the issue of assistance to Ukraine, remembered that they also have their unresolved dispute over the border between Ireland and Northern Ireland. Who does not remember, we remind you that Northern Ireland remains part of the UK, and Ireland remains part of the EU. But at the same time, the Belfast Treaty was signed in 1998, which put an end to 30 years of confrontation in the region. The essence of this agreement is the absence of a border between countries on the island of Ireland. However, if the UK is no longer in the EU, then there should be a border between the EU and the UK. Otherwise, it will be a "window to Europe" for various contraband and illegal refugees. Or "a window to Britain." That is why the parties conflict on this issue. London, which signed the Brexit agreement, which involves the transfer of all customs inspections from the border to Irish ports, is no longer satisfied with this point since the de facto border still exists. There are problems with checks, with logistics, and the Unionists of Northern Ireland are not happy with the current state of things. London wants to change several provisions of the agreement with the EU, which the EU itself categorically does not agree with. As a result, for almost a year now, London has been threatened with the application of Article 16, which allows in the event of force majeure to unilaterally terminate the Brexit agreement. The European Union has repeatedly stated that such a decision by the British will inevitably entail a lawsuit in Court. As a result, if the negotiations fail (and they have been going on for more than six months), then everything can end in Court. But that's not the worst part. The worst thing is if a trade war starts between the Alliance and the Kingdom. This means new duties, new restrictions, and deterioration of the geopolitical situation already in the North-West of Europe. So far, this news does not affect the pound and the euro, but who knows how it will end? London and Brussels just found the most convenient time for their dispute.

The average volatility of the GBP/USD pair over the last 5 trading days is 146 points. For the pound/dollar pair, this value is "high". On Friday, May 20, thus, we expect movement inside the channel, limited by the levels of 1.2351 and 1.2644. The reversal of the Heiken Ashi indicator downwards signals a round of corrective movement.

Nearest support levels:

S1 – 1.2451

S2 – 1.2390

S3 – 1.2329

Nearest resistance levels:

R1 – 1.2512

R2 – 1.2573

R3 – 1.2634

Trading recommendations:

The GBP/USD pair continues to form a new upward trend in the 4-hour timeframe. Thus, at this time, you should stay in buy orders with targets of 1.2573 and 1.2634 until the Heiken Ashi indicator reverses downwards. It will be possible to consider short positions if the price is fixed below the moving average line with targets of 1.2268 and 1.2207.

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 to trade 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.