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On Friday and Monday, the GBP/USD currency pair maintained its position above the moving average line (although this proved extremely tough) and resumed its upward trend. Although this movement cannot be characterized as robust, the British pound is still growing. Remember that the ECB convened a meeting last week that had nothing to do with the pound? However, meetings of central banks connected to the pound will occur this week and next week. Remember that the Bank of England is expected to raise interest rates by 0.5 percent at the beginning of August, which may be a tremendous boon for the British pound. Unlike the ECB, the Bank of England has not been passive in recent months. Therefore, the pound has considerably less cause to decline than the euro. It should also be highlighted that last week's British figures were not a failure. The indices of business activity in the service and manufacturing sectors did not fall below the "waterline" of 50.0, which we were especially delighted with. Therefore, we are not generally shocked by the pound's increase at the start of the week.
Furthermore, how long will this expansion continue? The British pound suffers the same correctional issues as the euro. They occur sporadically and are superficial. The pound/dollar exchange rate is still approaching its 2-year lows, but it must drop another 500-600 points to reach absolute lows. Few believed the euro would reach parity with the dollar, yet it did. We do not believe that the decline to $1.14 should be disregarded and forgotten immediately. The pound will likely continue to decline for several months if the Fed rapidly raises interest rates and the geopolitical situation continues to deteriorate as it is today. And this may be sufficient to update the absolute minimums.
The pound is rising before the Fed meeting when it should be falling.
No significant events are scheduled during the week that has just begun in the United Kingdom. Thus, traders will be required to examine only American statistics and occurrences, which will not be excessive. The most significant event will be the Fed meeting, which will be released late Wednesday evening. In addition, there will be no significant events in the United States until Wednesday. On this date, a report on orders for long-term products is scheduled to be released, which can elicit a large market reaction in the past because these goods are quite expensive, and their volumes can be determined by consumer demand. However, this report has been widely disregarded in recent months. Possibly a 20-30 point reaction will follow, but not much more.
The Fed meeting is a distinct subject. No one believes that the interest rate will increase by 0.75 percent, but an increase of 1.00 percent is also possible. Logically, the US dollar should have already experienced a new wave of strength, but instead, the British pound is rising. The market has probably already anticipated all future Fed rate hikes, as the 3.5 percent rate increase has been well known for some time. Even with a rise of 1.00 percent, the dollar is falling in this instance. Unfortunately, it is impossible to establish whether the market has anticipated all future monetary policy tightening. We continue to believe, however, that the dollar has not yet said its final word and may experience a significant rally this week.
On Thursday, the United States will issue its second-quarter GDP data. Forecasts suggest a quarterly increase of 0.4% to 0.6%, which is excellent following a loss of 1.6% in the first quarter. However, this prediction must come true before we can speak about a positive trend. The remaining reports on Thursday and Friday are, in all honesty, of a secondary character and are unlikely to generate much market attention.
During the last five trading days, the average volatility of the GBP/USD pair was 119 points. This value for the pound/dollar combination is "high." Therefore, on Tuesday, July 26, we anticipate movement inside the channel, constrained by the levels of 1.1920 and 1.2158. The Heiken Ashi indicator's downward reversion signifies a new bout of corrective activity.
Nearest support levels:
S1 – 1.2024
S2 – 1.1963
S3 – 1.1902
Nearest resistance levels:
R1 – 1.2085
R2 – 1.2146
R3 – 1.2207
The GBP/USD pair remains positioned above the 4-hour moving average, indicating a favorable trading opportunity. You should thus maintain purchase orders with goals of 1.2085 and 1.2146 until the Heiken Ashi indicator turns bearish. When the price is below the moving average, sell orders should be placed with targets of 1.1902 and 1.1842.
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.
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.
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