GBP/USD: recovery after correction 01 March 2021, 12:28

GBP/USD: recovery after correction

01 March 2021, 12:28

Scenario
Timeframe	Intraday
Recommendation	BUY STOP
Entry Point	1.4005
Take Profit	1.4100
Stop Loss	1.3950
Key Levels	1.3800, 1.3861, 1.3900, 1.3950, 1.4000, 1.4050, 1.4100, 1.4150

Alternative scenario
Recommendation	SELL STOP
Entry Point	1.3945
Take Profit	1.3800
Stop Loss	1.4020
Key Levels	1.3800, 1.3861, 1.3900, 1.3950, 1.4000, 1.4050, 1.4100, 1.4150

Current trend

GBP is correcting against USD in the trading session this morning, recovering from a confident decline at the end of the previous trading week. The weakening of GBP was facilitated by a large-scale correction in the bond market, which provoked a decrease in demand for risky assets. GBP was also under pressure from the comments of the Bank of England officials. Last Friday, the chief economist of the regulator, Andy Haldane, made a speech in which he pointed to the risks of inflation, noting that it will be extremely difficult to contain it as the global economy recovers from the effects of the pandemic.

Meanwhile, investors continue to praise the effectiveness of the UK coronavirus vaccination campaign, expecting the latest travel restrictions to be fully lifted by summer or fall 2021. Today, traders are awaiting the release of February UK Manufacturing PMI from Markit. Also, data on the dynamics of consumer credit in January will be released.

Support and resistance

On the D1 chart, Bollinger Bands demonstrate a tendency to reverse into a horizontal plane. The price range is narrowing, reflecting the emergence of ambiguous dynamics of trading in the short term. MACD is going down preserving a stable sell signal (located below the signal line). Stochastic demonstrates similar dynamics but its line is rapidly approaching its lows, pointing at risks of oversold GBP in the ultra-short term.

Resistance levels: 1.4000, 1.4050, 1.4100, 1.4150.

Support levels: 1.3950, 1.3900, 1.3861, 1.3800.

Trading tips

To open long positions, one can rely on the breakout of 1.4000. Take-profit – 1.4100. Stop-loss – 1.3950. Implementation time: 1-2 days.

A rebound from 1.4000 as from resistance, followed by a breakdown of 1.3950 may become a signal for new sales with the target at 1.3800. Stop-loss – 1.4020.