The pair British pound with the American dollar on the 1st of June established the maximum of the current year at the level of 1.4250. Together with the maximum from the end of February a double top formation was formed. Such a pattern usually indicates a change in the current trend or at least a correction of the recent upward trend.
- bullish engulfing pattern on D1 and H4
- Omicron – new variant of covid-19 virus
- New travel restrictions in UK
This has happened and the second half of 2021 is marked by declines. Last Friday the price reached the demand zone formed almost a year ago reaching the level of 1.3275 establishing the minimum of this year.
At the end of the day the pair started to recover the losses and the day ended at 1.3333. On the daily chart a bullish outside bar appeared.
On the H4 chart the first signs that an upward correction may begin appeared already during the Friday’s London session. It was then that a large upward H4 candle covered the previous one forming a bullish engulfing pattern. When the price broke upwards also an upward divergence appeared.
To sum up, in the coming days the GBPUSD pair may continue the upward correction started last Friday. A threat to the upward scenario may be the global epidemiological situation – the detection in South Africa of a new variant of the covid-19 virus, which has been given the name ‘Omicron’.
In connection with this situation, the UK government announced new restrictions to slow down the spread of the Omikron variant. These are a mandatory PCR test for travellers entering the country and a quarantine/isolation order until a negative result is obtained.
If more countries introduce restrictions and lockdowns – and the negative sentiment on stock exchanges continues – it will be difficult to predict the reaction of markets and quotations of individual financial instruments and all technical analyses can become unvalid.
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