23.05.202206:41 Forex Analysis & Reviews: Overview of the GBP/USD pair. May 23. Indices of business activity and US GDP in the second assessment. The pound will seek further support.

The GBP/USD currency pair returned to its highs of the week on Friday but still cannot reach its previous local highs, which are located near the Murray level "7/8"-1.2634. That is, at the moment, we can draw the same conclusion as for the euro: there is no reason to expect that the downtrend is over. The fact that the British pound managed to gain a foothold above the moving average with grief should not be misleading. The pair could have previously gained a foothold above the moving average, but this has not led to strong growth in recent months. Thus, even now the pair can bargain around the 25th level for another week, after which it will collapse down again. Recall that the market is not eager to buy the pound right now. This is evidenced by the COT reports and the fact that four increases in the key rate by the Bank of England were ignored by the bulls. Formally, the pound has grounds for growth. Still, the market may "remember" that the Bank of England is also making efforts to suppress inflation, and British macroeconomic statistics, as shown last week, are not so bad. In addition, there is a technical factor that requires a tangible upward correction. However, everything will also depend on the market mood and demand for the dollar. Recall that COT reports on the euro currency have long signaled a "bullish" mood, but the euro only does what it falls. If the demand for the dollar remains high, and traders continue to refuse to buy the pound, then no technical factors will help the pair to go up at least another 200-300 points.

The pound does not have much to count on, only in the favor of the bears.

Last week, we already said that amid the military conflict in Eastern Europe, Britain, and the EU remembered that they have their unresolved conflict. So far, this is not even a conflict, but a controversial situation in which each of the parties is trying to bargain for the best conditions for themselves. However, there is a serious possibility that London and Brussels will not be able to find a common language on the issue of the "Northern Ireland Protocol". In this case, the Brexit deal may be terminated, and a trade war may begin between the Kingdom and the Alliance. If so, it will add additional pressure on the British and European economies, which are already going through hard times.

But back to macroeconomics. There are few reports and events planned for this week in the UK. Indices of business activity in the services and manufacturing sectors on Tuesday and, in fact, everything. In the States, the situation will be a little more interesting. The same business activity indices will be published (on Tuesday), orders for long-term goods (Wednesday), GDP in the first quarter in the second estimate (Thursday), and personal income and expenses of the American population (Friday). At first glance, it may seem that there will be plenty of statistics, but this is only at first glance. All of the above reports have a market reaction potential of 20-30 points. What is 20-30 points now, when the average volatility of the pound over the past 30 days is 124 points per day? Thus, other factors will prevail. For example, geopolitical. For example, the mood factor. The latter factor is now the most important, because, whatever the background, traders still cannot constantly move the pair only in one direction. Now the reverse movement seems to have begun, the bears can continue to take profits on short positions. If this happens, then the pound will continue to move up, even if there is no supporting macroeconomics or foundation.

The average volatility of the GBP/USD pair over the last 5 trading days is 138 points. For the pound/dollar pair, this value is "high". On Monday, May 23, thus, we expect movement inside the channel, limited by the levels of 1.2343 and 1.2620. 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 1.2620 until the Heiken Ashi indicator turns down. It will be possible to consider short positions if the price is fixed below the moving average line with targets of 1.2329 and 1.2268.

Explanations of the illustrations:

Linear regression channels - help to 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 you should 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.