02.02.202114:29 Forex Analysis & Reviews: Pound may rise in the medium term

The media is actively touting the success of the British pound, announcing a staggering 10-month rise in value.

According to Bloomberg, GBP / USD is now trading towards 1.4000, which is in contrast to an earlier forecast saying that it will decline this first quarter of 2021.

In any case, analysts are confident that the pound will continue to climb up, especially since UK authorities have introduced COVID-19 vaccines ahead of the United States and other countries. The ongoing restrictions aimed at fighting the coronavirus are also pushing back the possibility that the Bank of England will impose rate cuts in the future.

Of course, the containment of the virus would really result in economic growth and the blocking of negative interest rates will attract investors. However, there are assumptions that these are just dreams of traders who are in long-term operations, and that in the end, everything will turn out differently.

In fact, at the moment, landlords in the UK are going through one of the worst periods, having lost roughly £ 4 billion in rent. Many have also gone bankrupt amid the forced closing of bars, pubs, restaurants, shops, etc.

In terms of technical analysis, things are no better. The rapid rise of the pound has led to a stunning overbought, and given the fact that there has been no full-sized correction in the market so far, many traders are fearing a possible collapse.

The media is saying that the quote could reach 1.4000 or even 1.4350, but around 1.3750 / 1.4350, GBP / USD may turn down as this is where the trend slowed and reversed before.

And with this, another question arises: how will speculators behave when they see the pound reversing amid a high degree of overbought?

It is entirely possible that the upward trend will persist in the market, but for its stability and rational distribution of trading interests, GBP / USD needs a full-sized correction to prevent a collapse to critical overbought levels.

Outlook for GBP / USD

Looking at the price fluctuations since the beginning of the year, it is clear that GBP / USD traded sideways, as well as moved along 1.3650 / 1.3750.

Of course, this will not go on forever, so traders are actively working on scenarios of a possible breakout. However, such will only happen if the price is kept outside the borders, at least in the H4 and D1 charts.

But if the quote successfully achieves a breakout, GBP / USD will climb towards 1.4000.

If it undergoes a full-sized correction, price will drop to 1.3300-1.3000.

Indicator analysis

Analyzing the different timeframes (TF), we can see rather versatile signals, in which the M15 chart signals BUY because of the movement away from 1.3650 / 1.3750. Meanwhile, H1 chart signals SELL because of the decline in price, while D1 chart signals BUY because of the upward trend.

Weekly volatility / Volatility measurement: Month; Quarter; Year

Volatility is measured relative to the average daily fluctuations, which are calculated every Month / Quarter / Year.

(The dynamics for today is calculated, all while taking into account the time this article is published)

Volatility is currently at 46 points, which is actually very low. But many expect that activity will soon grow, following an increase in trading volumes.

Key levels

Resistance zones: 1.3750 **; 1.3850; 1.4000 ***; 1.4350 **.

Support Zones: 1.3650 **; 1.3300; 1.3000 ***; 1.2840 / 1.2860 / 1.2885; 1.2770 **; 1.2620; 1.2500; 1.2350 **; 1.2250; 1.2150 **; 1.2000 *** (1.1957).

* Periodic level

** Range level

*** Psychological level