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Review of the GBP / USD pair. February 26. Bitcoin-like pound sterling. UK Debt Rising, Traders Awaiting Budget Draft



DATE OF PUBLICATION: 2021-02-26 07: 32: 304-hour timeframe Technical data: Major linear regression channel: direction – upward; Younger linear regression channel: direction – upward Moving average (20; smoothed) – sideways CCI: -49.4427 While the European currency in tandem with the dollar for some reason works out the technical picture, patterns, signals, follows global fundamental factors, the pound / dollar pair is simply growing. Why do we need technical analysis, fundamental analysis, if, as members of the Reddit community have shown, you just need to agree to buy the same asset, and it will rise in price, bringing profit to everyone. Bitcoin rises in price on Elon Musk’s tweets, the shares of the game store GameStop are growing, because on one forum its users agreed to buy them, the pound sterling grows by 28 cents for 11 months for no particular reason, while before that it fell for 4 years for 33 cents for quite clear and objective reasons. These are the realities of 2020-2021. The British economy has been suffering for the past 4 years, many companies simply leave Foggy Albion, the trade agreement with the European Union, signed literally on its knees at the New Year’s table, does not affect the service sector, there may not be a trade agreement with the United States at all, since Boris Johnson’s friend Donald Trump – is no longer the president of the United States. The Kingdom may lose Scotland in the coming years, the “coronavirus” has caused enormous damage to the economy, and it is still completely unclear what consequences will be left by the new strains of COVID, which for some reason are found with enviable regularity in the UK. And with all this, the pound sterling manages to rise in price. No, we remember that the money supply in the United States is growing and has grown in 2020 much stronger than in the UK. But Britain has much more problems than the European Union. The euro has gained 17 cents over the past 11 months. If the British pound, despite all the problems of Great Britain, grew, say, also by 17 cents, it would be absolutely logical. If the British currency corrected at least occasionally, logic could also be found in this upward movement. However, the pound has continued to rise for five months and during this time there has not been a single significant correction. Rollbacks of 150-200 points do not count. Even the day before yesterday, when the pound / dollar pair fell by 150 points (by the way, it is also unknown why), many breathed out – now the long-awaited drop in the pair’s quotes will begin! But no. Already on Thursday, the upward movement recovered and the pair again found itself near its 2.5-year highs, which it updates almost every day. Various experts, many of them with a worldwide reputation or represent large banks and rating agencies, present as possible reasons for such a strong growth of the British currency high rates of vaccination and market optimism about London’s avoidance of the fate of a “hard” Brexit. However, let me ask then, where was the pessimism of the markets when Michelle Barnier and David Frost, for 9 or 10 months, almost daily stated that there was almost no chance of a deal? By the way, the same mantra was repeated by Ursula von der Leyen, Maros Shefchovich and other representatives of the EU’s highest policy. At the same time, Boris Johnson flaunted the phrase that Britain was not at all afraid to leave the EU without a deal. Where were the bears when the UK introduced two lockdowns this winter? After all, the pound sterling grew a few months ago too. In general, we still insist that the nature of the growth of the British currency is 60% of the factor of “infusion of huge money into the American economy” (the money supply in the UK grew in 2020 by no more than 15%) and 40% speculative factor. By the way, yes, it should also be remembered that for the last six months the Bank of England has been walking on the edge of the abyss in the issue of negative rates. She also complains that the European Union does not welcome British financial companies with open arms, and there are also not-so-obvious dangers to the British economy. For example, in 2020, the country faced the highest level of government borrowing in peacetime. And by March 3, Finance Minister Rishi Sunak must submit a draft budget, in which it is not yet known whether there will be room for new programs to support businesses and citizens. If it is not found or the programs will be significantly cut, then representatives of the private sector have already announced that they will be forced to cut their staff. Potentially, this could result in an increase in unemployment up to 7.5%. This will automatically create a burden on the same budget, since more unemployment benefits will have to be paid, but the amount of taxes received will decrease. If state programs of assistance and support are extended, then these are additional costs. According to research from the Institute for Fiscal Research, the UK authorities will have to raise taxes by 60 billion pounds to fill any holes in the budget. Projections suggest that if the British economy recovers slowly and sluggishly after the crisis and three lockdowns, the size of government borrowing could grow by another 130-190 billion pounds and reach almost 400 billion pounds by the end of fiscal 2020. In a positive scenario, it will reach pre-crisis levels of about 50 billion. But who now believes in optimistic scenarios? Citibank economist Ben Nabarro believes that the decision to introduce negative rates by the Bank of England is inevitable. The regulator will have to lower the cost of borrowing below zero, and this may happen before the end of 2021. Thus, it is likely that the British economic recovery will be slow, and the monetary policy of the Bank of England will be softened even more. In general, the prospects for the British economy are still dim and this is still too lenient expression. But what is the difference between the pound and the buyers of the pound? The average volatility of the GBP / USD pair is currently 120 pips a day. For the GBP / USD pair, this value is “high”. On Friday, February 26, therefore, we expect movement within the channel, limited by the levels of 1.3935 and 1.4165. A reversal of the Heiken Ashi indicator back upward will signal a possible resumption of the upward movement. Nearest support levels: S1 – 1.4038S2 – 1.3977S3 – 1.3916 Nearest resistance levels: R1 – 1.4099R2 – 1.4160R3 – 1.4221 Trading recommendations: GBP pair / USD on the 4-hour timeframe has begun a new round of downward correction. Thus, today it is recommended to open new long positions with the targets of 1.4099 and 1.4160 in case the price rebounds from the movable. It is recommended to consider sell orders with the targets of 1.3977 and 1.3935, if the price consolidates below the moving average. Recommended reading: EUR / USD pair overview. February 26. Powell’s speech to Congress was interesting, but not great. The dollar resumed its decline. Congress prepares to vote. Trading signals, COT report: Forecast and trading signals for the EUR / USD pair for February 26. Forecast and trading signals for the GBP / USD pair for February 26. Material provided by InstaForex – www.instaforex.com Source – InstaForex

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