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GBP / USD. Encouraging news from Britain and Powell’s Dovesong



DATE OF PUBLICATION: 2021-02-23 21: 12: 58So, the pound-dollar pair has taken a new price height today, having already tested the 41st figure. In less than three weeks, the pair covered the 600-point path, demonstrating a strong and almost recoilless northern trend. The “hegemony” of gbp / usd buyers is explained by the fact that against the background of the strengthening of the British currency, the US dollar continues to lose ground throughout the market. Today, this multidirectional dynamics has once again shown itself: the pound enjoyed support from macroeconomic reports, while the greenback once again came under pressure from the head of the Fed, Jerome Powell, who voiced rather “dovish” theses in Congress. As a result, the fundamental background allowed the gbp / usd bulls to “look” into the area of ​​the 41st price level, simultaneously updating another multi-month high. Let’s start with the news from the UK. Looking ahead, we can say that the British labor market “did not disappoint.” Today’s release is yet another confirmation that the UK economy has weathered the fall-winter blow of the coronavirus crisis, when the country was forced to face a lockdown for the third time. Despite strict quarantine restrictions, the main macroeconomic indicators did not sag (by analogy with the spring of 2020), and in some cases even showed positive dynamics. The same can be said about today’s release. Thus, the number of applications for unemployment benefits fell by 20 thousand, contrary to forecasts of growth by 13 thousand. In December, this component also came out in the negative area, reflecting “healthy trends” in the labor market. The salaries did not disappoint either. Average earnings have been growing for the fourth month in a row. Today, this component also entered the “green zone”, having renewed multi-month highs. Taking into account premium payments, the indicator increased to 4.7%, excluding bonus payments – to 4.1%. The unemployment rate increased slightly – to the level of 5.1% (from the previous value of 5.0%). Given the degree of quarantine restrictions that were in place in the UK in late autumn and throughout the winter, such a result is, in my opinion, quite acceptable. However, it is not only macroeconomic reports that support the British currency. On the side of the pound was the “coronavirus factor”. Yesterday the Prime Minister presented a roadmap for getting out of the lockdown. There will be four stages in total, the implementation of which will stretch from March to June. In particular, the first quarantine restrictions will be eased on March 8 – schools will be opened in the country, and residents will be allowed to hold picnics. With each subsequent stage, the number of “liberties” will increase. The final return to normal life is expected on June 17th – on this day they plan to remove all restrictions. At the same time, the vaccination process in the UK is gaining momentum: to date, more than 17.5 million people (that is, almost a quarter of the 70 million population) have received the first dose of the coronavirus vaccine. In terms of vaccination rates, Britain is second only to Israel and the UAE. The entire UK adult population is slated to be vaccinated by the end of July. Brexit news also provided background support for the pound today. Today it became known that London agreed, at the request of Brussels, to postpone the ratification of the trade agreement until April 30. Back in February, the European Union offered Britain to provide additional time to ratify the agreement, extending the preliminary application of the agreement until the end of April. The problem is purely technical – the text was not translated into all 24 languages ​​of the Alliance for Parliamentary Control. The fact that London met Brussels halfway on this issue added to the overall positive fundamental picture for gbp / usd. But the US dollar, in turn, today came under pressure from Jerome Powell’s dovish rhetoric. And although he did not voice anything new or sensational, the American currency reacted negatively to his words. Speaking in Congress, the head of the FRS said that recently (namely, over the past three months) there has been no significant progress in achieving the goals. At the same time, the head of the regulator stated that the growth of the American economy “significantly slowed down” after the recovery last summer. Thus, he neutralized rumors that the Fed may start early phasing out QE. Powell noted that “over time” the increase in the balance sheet will slow down, but at the same time asset purchases will continue until the regulator is convinced of significant progress in the main areas. In other words, Jerome Powell made it clear today that the current parameters of monetary policy are foreseeable the future can be changed only in the direction of softening – now we cannot speak of any early winding down of QE. The interest rate will also be held at the current level until full employment is achieved and inflation rises to the target of 2% “or slightly higher.” Thus, the prevailing fundamental picture encourages further growth in the pound-dollar pair. This impulse growth is usually followed by a corrective pullback that can be used to open longs. From a technical point of view, the pair on all timeframes (from H4 and higher) is either on the upper Bollinger Bands line, or between the middle and upper lines of this indicator. In addition, the Ichimoku indicator on the four-hour, daily and weekly charts shows a bullish “Line Parade” signal. The main target of the upward movement is the 1.4150 mark – this is the upper line of the Bollinger Bands at W1. Material provided by InstaForex – www.instaforex.com Source – InstaForex

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