10.04.202311:47 Forex Analysis & Reviews: GBP/USD. Overview for April 10. US inflation may provoke a new decline in the dollar

The GBP/USD currency pair also struggled to move downward on Friday. In principle, everything said in the EUR/USD article is also true for the British pound. At the moment, the pair has dropped below the moving average line and will try to overcome it, but this breakthrough will practically mean nothing in the event of success. The technical picture for the pound is much more interesting than the euro. It should be noted that the pair is still close to the upper border of the sideways channel 1.1840–1.2440, in which it has been trading for more than three months. Although the pair moved 50–60 points above this channel last week, we do not believe that the flat on the 24-hour TF is over. The pound has risen 700 points in the past few weeks, with practically no corrections and no serious fundamental reasons. Obviously, to continue the growth, the pair needs to retreat at least 200–300 points downward. But in this case, the pair will remain within the sideways channel, and the market may remember that there were no reasons for the growth of the British currency, and there still aren't any.

Thus, the pound's growth can continue if the market ignores the fundamental and macroeconomic background. Last Friday, despite its half-day status, the dollar had an excellent opportunity to grow by 100 to 150 points. Even though the key report on non-farm payrolls didn't come in higher than expected, the unemployment rate did go down! Logically, at the beginning of this week, the pair's decline can be expected, as it should happen according to many factors, but at the same time, everything will depend only on the market. If it continues to buy the pound just like that, then no matter the factors, the pound will continue to grow, and the dollar will continue to fall.

The inflation report is unlikely to help the dollar!

We already find it strange that so many experts worldwide keep saying that the American economy is worsening and that the dollar is falling. Each subsequent report shows that inflation is slowing down at a good pace, GDP remains at an excellent level, and unemployment is at a 50-year low. Only business activity indices are pumping but have not yet led to an economic slowdown. Thus, the market ignores objective reality if the dollar falls against this background.

This week in the UK, there will be a speech by Bank of England Governor Andrew Bailey (on Wednesday) and the publication of GDP and industrial production reports (on Thursday). It should be noted that the GDP reports will be monthly and objectively weaker than the quarterly ones, which the market is also happily ignoring now. Mr. Bailey speaks very rarely and makes important statements even less frequently. The speech by Silvana Tenreyro on Friday will be much more interesting, as she has already started talking about lowering the key rate. If the "dovish" rhetoric is maintained or appears in Andrew Bailey's speech, the pound may finally begin to fall. But again, everything will depend only on the traders' desires.

As usual, the news will be a bit more cheerful in the States. There will be speeches by several Federal Reserve representatives, an inflation report, the minutes of the last Federal Reserve meeting, the producer price index, retail sales, industrial production, and the University of Michigan consumer sentiment index. In theory, any of these reports could make people react, but only the inflation report has a real chance of changing how traders feel. And, most likely, this influence will not favor the dollar. Experts forecast that March's inflation will slow to 5.2–5.3%. If the forecast comes true, the US currency may fall even lower, as the Federal Reserve will have even fewer reasons to raise the key rate at least one more time in 2023. The faster inflation falls, the faster the Federal Reserve will move to lower the rate, which again is bad for the dollar. Therefore, at the moment, in case the market moves to a logical reaction, the dollar has more chances to fall again this week than grow. But at the same time, it cannot fall constantly, and a correction is also needed.

The average GBP/USD pair volatility for the last five trading days is 101 points. For the pound/dollar pair, this value is considered "average." As a result, we anticipate movement within the channel on Monday, April 10, with levels 1.2303 and 1.2505 acting as limits. A reversal of the Heiken Ashi indicator upwards will signal the resumption of the upward trend.

Nearest support levels:

S1 – 1.2390

S2 – 1.2329

S3 – 1.2268

Nearest resistance levels:

R1 – 1.2451

R2 – 1.2512

R3 – 1.2573

Trading recommendations:

The GBP/USD pair in the 4-hour timeframe has started a weak correction. New long positions can be considered with targets at 1.2451 and 1.2512 if the Heiken Ashi indicator is reversed upwards or there is a bounce off the moving average. Short positions can be considered if the price consolidates below the moving average, with targets at 1.2329 and 1.2303.

Explanations for illustrations:

Linear regression channels - help determine the current trend. If both are directed in the same direction, the trend is strong.

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

Murrey levels - target levels for movements and corrections.

Volatility levels (red lines) - the probable 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 overbought area (above +250) indicates that a trend reversal is approaching in the opposite direction.