The GBP/USD currency pair has been trying to overcome the level of 1.3184 from below for a long time. Then, when it finally worked out, it rose sharply, but the next day it fell like a stone, and now it is again near the level of 1.3184. We now consider this level to be a certain level of balance, the level of a fair exchange rate of the pound/dollar pair, taking into account all macroeconomic and geopolitical factors. Admittedly, the pound's positions do not look as hopeless now as the positions of the euro currency. After all, the Bank of England has already raised the rate three times and has also shown its readiness to further tighten monetary policy. However, this has not yet affected inflation in any way, which accelerated again in February (and much stronger than in January or December). We have already said that at this time the problem of high inflation lies not only in the plane of monetary policy and economic regulation. At the moment, production and logistics chains around the world have not yet recovered from the two-year pandemic.
Oil and gas are rising in price and pulling all other goods and services with them. The military conflict in Eastern Europe is causing panic in the stock markets. In general, the situation is absolutely unstable. And most importantly, no one knows how and when it will end. At a time when the leaders of the United States and Russia are already openly declaring possible nuclear strikes, we would be very tense and thoughtful. Of course, they like to show weapons both in Russia and in the USA. This is called the "policy of intimidation". But neither Russia nor the United States is afraid of a possible nuclear war. And all the other countries of the world are now just in the front row of the theater of military operations and watching how it will end. Thus, monetary policy in the current situation may not stop inflation, no matter what country we are talking about. Consequently, very soon currency traders will realize that it is time to put up with the unusually high price growth and start working out other factors.
Boris Johnson continues to insist on tougher sanctions
Russian Press Secretary Dmitry Peskov yesterday called British Prime Minister Boris Johnson the most active participant in the "anti-Russian" movement. It's hard to disagree with this. We have repeatedly said that Johnson is probably very glad that the attention of the public and the media has focused on the conflict in Ukraine, and his fellow citizens no longer remember the "coronavirus" parties, which could well cost the prime minister his chair. That's why Johnson is trying his best. He understands that after a whole series of scandals, dark stories, and failures on his part, he should take the strongest possible position in the conflict that has flared up in Eastern Europe. The year is 2022, and Johnson was elected to his post in 2019. New elections will be held in the UK soon enough, and a couple of months ago, the Conservative Party has predicted a crushing defeat in them.
However, now Johnson needs to take a position that would meet the interests of the British themselves, would show his strength and willingness to defend his country and his allies. And that's exactly what Johnson has been doing for the last month. Yesterday, the Prime Minister of Great Britain announced the need to increase defense aviation assistance to Ukraine. Johnson intends to use the NATO and EU summits to increase overall arms supplies to Ukraine and discuss new sanctions against Moscow. According to Johnson, President Zelensky should take the most confident position in negotiations with Vladimir Putin, and Western countries should help him in this. As for the British pound, which we are primarily interested in, it may resume its decline if the conflict in Ukraine begins to escalate or goes beyond the Ukrainian territory. There are already several possible points on the world map where new conflicts may break out. For example, Bosnia and Herzegovina, together with Finland, are "beating around the bush" on the issue of joining NATO. Poland imposes sanctions against Russia even beyond the "prescribed norm" and threatens to send peacekeeping troops or provide military aircraft to Ukraine. Moscow hints that it may strike some Polish cities in response to an act of aggression against the Russian army.
The average volatility of the GBP/USD pair is currently 101 points per day. For the pound/dollar pair, this value is the average. On Friday, March 25, thus, we expect movement inside the channel, limited by the levels of 1.3076 and 1.3278. A reversal of the Heiken Ashi indicator upwards will signal a new round of upward movement.
Nearest support levels: S1 – 1.3184; S2 – 1.3123; S3 – 1.3062.
Nearest resistance levels: R1 – 1.3245; R2 – 1.3306.
Trading recommendations:
The GBP/USD pair has started a new round of corrective movement on the 4-hour timeframe. Thus, at this time, it is possible to consider new purchase orders with targets of 1.3245 and 1.3278 in the event of a price rebound from the moving average. It will be possible to consider short positions no earlier than fixing the price below the moving average with targets of 1.3123 and 1.3076.
