4-hour timeframe

Technical details:

Higher linear regression channel: direction - upward.

Lower linear regression channel: direction - upward.

Moving average (20; smoothed) - upward.

CCI: 98.7842

The British pound continues to react to what is happening in the world with much less eagerness than, for example, the euro/dollar pair. We have repeatedly said that if there is no openly failed and negative fundamental background in the European Union, then there is one in the UK. However, the pound has grown no weaker than the euro in recent weeks and has grown by 8 cents since July 1. Just as in the case of the euro, there were almost no corrections over the past month, and last Friday the pullback began, but so far it does not exceed the scale and size of the meager corrections that were in July. So, for now, we can't even say that the pair has started to adjust. Returning to the fundamental background, over the past week, no macroeconomic reports were published in Britain, there was not a single news item on the Brexit negotiations, there was not a single important message from Boris Johnson. Complete calm. However, the lack of news is not generally a positive thing. If the United States has so-called "4 crises", then the UK has its own "3 economic crises". At the very least, they were able to cope with the "coronavirus" in Foggy Albion, although new waves are expected with the arrival of autumn and winter. But while this is not the case, we can only focus on economic problems. And here the situation is not much different from the American one. If in the United States GDP decreased in the first quarter by 5%, and in the second by 33%, then in the UK GDP has been losing billions of pounds in the last 4 years, in the first quarter this figure decreased by 2.2%, and in the second it may lose 20.4%. You will agree that this is also a very large figure, although not as huge as in the United States. But at the same time, we should not forget that the fate of the American economy is in the hands of the White House. If the US government makes the right decisions, the epidemic can be stopped and the economy restored. But this judgment cannot be applied to the UK. Since there will be no "deal" with the European Union with almost 100% probability, and not because Boris Johnson or David Frost are bad diplomats, but because London simply does not want to sign a comprehensive agreement with Brussels. London does not want to make mutual concessions. London does not want to remain dependent on the European Union. Thus, Boris Johnson, who was initially ready to take the country out of the EU through a "hard" Brexit, has not changed his position at all now. Personally, the Prime Minister is not afraid of this option, but he is afraid of the Bank of England, Andrew Bailey and all the economists and businessmen of the Foggy Albion. Because everyone understands that if the UK suffers losses of 70-100 billion pounds annually since 2016 due to Brexit, then after December 31, 2020, when Brexit will be officially completed, and there will be no trade deal with either the European Union or the US, this will be another stronger blow to the British economy. Thus, from our point of view, the British economy will certainly begin to recover in the third and fourth quarters, but the recovery will be weak, and in 2021, there may be a slowdown in the growth rate of the economy. And this is all in a favorable epidemiological situation in the country. If there is a second "wave" of the pandemic, then a new quarantine, a new "lockdown" will be possible. And if the British government is as selfish as in the US, and does not introduce a new quarantine, then this will not save the economy much. An example is America at this time.

At the same time, the situation across the ocean does not change at all. The pandemic in America is slowing down a little, but we can not yet say that the wave of the epidemic is coming to an end. Every day, at least 60,000 cases of diseases are recorded in the United States. Donald Trump, on whom much depends now, continues to conduct polemics and try to "whiten" his reputation. In particular, the US president announced this weekend that China is to blame for high unemployment. "Pelosi and Schumer blocked the necessary unemployment payments. This is so terrible, especially given that they know for sure that it's not the fault of the workers, it's the fault of China!"- Donald Trump wrote on Twitter, not forgetting to "take a ride" on the Democrats. At the same time, there were 14 cases of "coronavirus" among US congressmen and senators.

Based on all the above, it follows that the British pound should stop rampant growth in the near future, because the fundamental background in the UK is now no better than in the United States. At the same time, technical factors also remain extremely important. and they do not yet indicate in favor of changing the trend to a downward one. Thus, we still recommend considering trading for an increase until the pair's quotes are fixed below the moving average.

This week, an important event will finally happen in the UK - the meeting of the Bank of England. However, as with the Fed, no changes in monetary policy parameters are expected by traders, so it is unlikely that the reaction to this event will be strong. However, the speech by Bank of England Governor Andrew Bailey may have an impact on market sentiment. In any case, do not lose sight of this event. Also recently, we often talk about the publication of the report on GDP in the UK for the second quarter, but it is planned only for August 12, that is, not even for this week. As for the United States, the topic of "coronavirus" will continue to be in the first place, which will be supplemented by data on mass riots. Also on Monday and Tuesday, British Foreign Trade Minister Liz Truss plans to meet with US trade representative Robert Lighthizer and hold talks on a future free trade agreement, but, as Truss says, no one is going to rush the negotiations, and there is no clearly set schedule.

The average volatility of the GBP/USD pair continues to remain stable and is currently 114 points per day. For the pound/dollar pair, this value is "high". On Monday, August 3, thus, we expect movement within the channel, limited by the levels of 1.2967 and 1.3195. Turning the Heiken Ashi indicator upward will indicate the resumption of the upward movement of the pair.

Nearest support levels:

S1 – 1.3062

S2 – 1.2939

S3 – 1.2817

Nearest resistance levels:

R1 – 1.3184

R2 – 1.3306

R3 – 1.3428

Trading recommendations:

The GBP/USD pair started a correction cycle on the 4-hour timeframe. Thus, today it is recommended to wait for the completion of the correction and resume trading for an increase with the goals of 1.3184 and 1.3306. Short positions can be considered no earlier than fixing the price below the moving average with the first goal of the Murray level of "1/8" - 1.2817.