Forex Analysis & Reviews: 30.05.2023 - GBP/USD. Overview for May...

30.05.2023 07:21 AM

GBP/USD. Overview for May 30th. The pound sets a volatility record low on Monday

The GBP/USD currency pair did not move on Monday. As the article's title suggests, a "record low" in volatility was set at only 37 points. 37 points practically indicate a lack of movement. It was impossible to capitalize on them even in a 5-minute time frame. We can't even remember the last time the pair showed such unwillingness to move. A few years ago, there was a period when the market did not want to trade for a long time. The euro showed an average volatility of 40 points, and the pound had 60–70 points. It's important to understand that 40 points are low for the euro, and 60–70 points are low for the pound. But at least 60–70 points is something, while 40 points have virtually no theoretical chance to capitalize on. If a flat market begins in addition to that, one can refrain from entering the market until its completion.

We have previously drawn traders' attention to the decrease in volatility in recent months. It indicates that all the most important global factors have been worked out, and new factors are needed to justify trading in the market. And as we have already mentioned, a few such factors are currently on the horizon. Both pairs may show weak movements or a clear flat until central banks hint at easing monetary policy or inflation slows down to 3–3.5%. However, this is not imminent for the UK anytime soon.

Thus, the pound, like the euro, can decline calmly, occasionally correcting based on technical factors. This week, the UK is "empty," and in the United States, important publications are scheduled only for Thursday and Friday. Therefore, until Thursday, we may continue to observe passive market behavior. The fact that it has traded inactively before speaks only of the absence of factors for active trading. Therefore, movements on Tuesday and Wednesday can also be very weak.

There currently needs to be a significant fundamental background. On Monday, it became known that the Federal Reserve's rate may rise another 1-2 times, but we have been discussing this for over a month now. The ECB and the Bank of England are approaching the point where tightening will be completed. Rates cannot rise forever, especially when the economy is on the brink of a recession. Consequently, there is no longer a correlation between inflation and rates. The rate factor has been worked out. There are no new global factors influencing the market either.

The average volatility of the GBP/USD pair over the last five trading days is 77 points. For the pound/dollar pair, this value is considered "average." Therefore, on Tuesday, May 30th, we expect movement within the channel delimited by the levels of 1.2279 and 1.2433. A downward reversal of the Heiken Ashi indicator will signal a new downward movement.

Nearest support levels:

S1 - 1.2329

S2 - 1.2299

S3 - 1.2268

Nearest resistance levels:

R1 - 1.2360

R2 - 1.2390

R3 - 1.2421

Trading recommendations:

On the 4-hour timeframe, the GBP/USD pair continues to move southward, so short positions with targets at 1.2299 and 1.2279 remain relevant and should be maintained until the price is established above the moving average. Long positions can be considered if the price is above the moving average, with targets of 1.2421 and 1.2433.

Explanation of illustrations:

Linear regression channels - help determine the current trend. If both are directed in the same direction, the trend is strong.

Moving average line (settings 20.0, smoothed) - determines the short-term trend and the direction in which trading should be conducted.

Murray levels - target levels for movements and corrections.

Volatility levels (red lines) - probable price channel in which the pair will move the next day, based on current volatility indicators.

CCI indicator - its entry into the oversold area (below -250) or overbought area (above +250) indicates an approaching trend reversal in the opposite direction.

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*Disclaimer: The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.